Kashkari noted that interest rates may be "further moderately reduced," and a rapid weakening of the labor market does not seem to be coming soon.
Minneapolis Federal Reserve Chairman Kashkari said on Monday that as the 2% inflation target gradually emerges, it seems possible that the Federal Reserve's benchmark interest rate will be "further moderately reduced" in the next few quarters.
Kashkari said in a speech at a conference hosted by the Central Bank of Argentina, "It currently appears that moderately lowering our policy interest rate in the next few quarters may be appropriate to achieve our two goals."
He added, "Ultimately, the path of future policy will depend on actual economic, inflation, and labor market data."
The core inflation indicator for the United States in September was higher than expected, and the latest U.S. labor market data showed a decrease in the unemployment rate and continued strong hiring. These data have led investors to withdraw their previous bets that the Federal Reserve will cut the benchmark interest rate by another 50 basis points at its next meeting in November.
Kashkari said that the current target range for the federal funds rate is between 4.75% and 5%, and monetary policy is still restrictive to economic growth, but the specific degree of restriction is not yet clear.
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Kashkari said that the labor market remains strong, and the latest employment report shows that "a rapid weakening of the labor market does not seem to be coming soon." He added that inflation "has dropped significantly from its peak but is still slightly above our target, and the Federal Reserve is in the final stage of bringing inflation down to the 2% target."
Kashkari previously stated that he was satisfied with the Federal Reserve's 50 basis point rate cut in September, and a 25 basis point rate cut at each of the remaining two Federal Reserve meetings this year is a "reasonable starting point."
According to the median estimate released last month, Federal Reserve policymakers expect the Federal Reserve to cut rates by a total of another 50 basis points for the rest of 2024. The CME's FedWatch tool shows that federal funds futures still price in a 25 basis point rate cut by the Federal Reserve at the November meeting with a probability of 84.1%. This is down from 97.4% a week ago.