Kashkari becomes latest Fed official to pour cold water on any near-term rate cuts

Key Points

  • Neel Kashkari, president of the Minneapolis Federal Reserve, stated that the bar for cutting interest rates is "higher" due to tariffs, even if the economy weakens.
  • Federal Reserve Bank of San Francisco president Mary Daly emphasized that the central bank can take its time before adjusting rates, given the current policy stance.
  • Fed Chair Jerome Powell indicated that it's too early to determine the appropriate path for monetary policy amidst uncertainties.
  • Market expectations for Fed rate cuts have increased, with traders betting on five cuts starting potentially in May.
  • Kashkari highlighted the importance of keeping long-run inflation expectations anchored, despite potential economic downturns.

Summary

Neel Kashkari, president of the Minneapolis Federal Reserve, has expressed a cautious stance on interest rate adjustments amidst the ongoing trade tensions. He noted that the threshold for cutting rates has risen due to the need to anchor inflation expectations, even in the face of potential economic weakening and job losses. This perspective was echoed by other Fed officials like Mary Daly, who suggested that the central bank could afford to wait and see how trade policies unfold before making any rate changes. Despite market pressures for immediate rate cuts, Fed Chair Jerome Powell has also indicated a reluctance to rush into decisions, highlighting the uncertainties surrounding the economic impact of tariffs. Market participants, however, are betting on multiple rate cuts starting as early as May, reflecting heightened expectations for monetary policy easing. Kashkari emphasized the critical role of maintaining long-term inflation expectations, suggesting that the current economic environment makes both raising and cutting rates more complex. This cautious approach from the Fed comes at a time when inflation concerns are growing, with some officials like Adriana Kugler focusing more on inflation than employment, given the significant increase in effective tariff rates.

yahoo
April 9, 2025
Stocks
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