Fed's Kashkari says it's 'reasonable' to predict December rate cut
What did Neel Kashkari, the Minneapolis Federal Reserve President, predict about the U.S. central bank's interest rate movements for this year?
Neel Kashkari, the Minneapolis Federal Reserve President, predicted that it is "reasonable" to expect the U.S. central bank to cut interest rates once this year, likely waiting until December to do so. He emphasized the need to see more evidence that inflation is on its way back down to the 2% target before making any decisions. Kashkari also mentioned that he has been surprised by the resilience of the U.S. job market despite aggressive borrowing cost increases in 2022 and 2023, but he expects more cooling ahead.
Why did Kashkari emphasize the importance of taking time to gather more data on inflation and the economy?
Kashkari emphasized the importance of taking time to gather more data on inflation and the economy to ensure that the Federal Reserve makes informed decisions about interest rate adjustments. He stated that the central bank is currently in a good position to wait and collect more information on how inflation is progressing and how the economy and labor market are performing. By being cautious and patient, the Federal Reserve can avoid premature decisions that could lead to undesired outcomes, such as cutting rates too early and causing inflation to flare back up again. Gathering more data allows the central bank to have a better understanding of the economic situation and make more accurate predictions about the future path of inflation and the economy, ultimately leading to better policy decisions.
What did the Federal Reserve's projections indicate about the expected number of interest rate cuts this year?
The Federal Reserve's projections indicate that there is likely to be only one interest rate cut this year. This is a downgrade from their previous prediction of three rate cuts. The decision to cut rates is influenced by the progress made towards lowering inflation, which has remained persistently above the central bank's target level. The Fed's benchmark interest rate, which has been at a 23-year high since July of last year, is expected to be reduced for the first time in years, a move that would eventually lighten loan costs for consumers.