Minneapolis Federal Reserve President Neel Kashkari said on Monday that he expects policymakers to slow the pace of interest rate cuts after cutting rates by half a percentage point last week.
“I think beyond 50 basis points we’re still in a net tight position,” Kashkari told CNBC.scream box“Interview. “So I’m comfortable taking bigger first steps, and then as we move forward, I anticipate that, overall, we’ll probably take smaller steps unless the data changes significantly.
The Federal Open Market Committee made a decision on Wednesday that was at least a little surprising. Vote to lower benchmark overnight borrowing rate Half a percentage point, or 50 basis points. It’s the first time the committee has cut rates by this much since the early days of the coronavirus pandemic and the 2008 financial crisis before that.
Kashkari said that while the measure was unusual from a historical perspective, he believed it was necessary for interest rates to reflect policy readjustment The focus has shifted from overheating inflation to paying more attention to the weakness of the labor market.
His comments suggested the central bank could return to more traditional measures in quarter-percentage-point increments.
“Right now, we still have a strong, healthy labor market. But I would like to maintain a strong, healthy labor market, and a lot of the recent inflation data looks very positive and we’re getting back on track. 2%,” he said.
“So I don’t think anyone at the Fed will declare mission accomplished, but we are looking at the most likely near-term risks,” he said.
As part of the committee’s rotation plan, Kashkari won’t get a vote on the FOMC until 2026, although he does have a say in policy meetings.
Wednesday’s rate cut shows that the Fed is normalizing interest rates and returning them to a “neutral” stance that neither promotes nor restricts economic growth. FOMC members said in their latest economic forecast that interest rates are likely to be around 2.9%; the current federal funds rate target is between 4.75% and 5%.
Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said in a separate speech on Monday that he expected the central bank to take active action to restore neutral interest rates.
“Progress on the inflation front and the cooling of the labor market is happening much faster than I thought at the beginning of the summer,” said Bostic, who voted on the Federal Open Market Committee (FOMC) this year. “At this point, I expect monetary policy to The time for normalization is earlier than I thought it would be appropriate a few months ago.”
Bostic also pointed out that Wednesday’s rate cut puts the Fed in a better position on policy because it can slow the pace of easing if inflation starts to peak again, and if the labor market slows further, the Fed The meeting can speed up the pace of easing.
Market pricing predicts that the FOMC is relatively evenly likely to cut interest rates by 25 percentage points or 0.5 percentage points at its November meeting. A larger rate cut in December is more likely, with further interest rate cuts totaling 0.75 percentage points before the end of the year. According to CME Group Group) data, this year Fed Watch measure.
