On Monday (October 21st) local time, Minneapolis Federal Reserve's Kashkari indicated that he currently favors a slower pace of rate cuts in the coming quarters, but if the job market deteriorates sharply, he might advocate for accelerating the pace of rate cuts.
The Federal Reserve announced a 50 basis point rate cut last month, lowering the target range for the federal funds rate to 4.75%-5.00%, thus initiating the much-anticipated rate-cutting cycle. The market currently widely expects the Federal Reserve to cut rates by 25 basis points at the November interest rate meeting.
Kashkari said on Monday at an event in Wisconsin that he supported the policymakers' 50 basis point rate cut last month, but he expects smaller rate cuts at future meetings. The Federal Reserve's monetary policy action last month surprised many, with some critics arguing that policymakers should not have cut rates by 50 basis points, but should have taken a smaller rate cut.
"At present, I anticipate that there will be some more moderate rate cuts in the coming quarters to approach the neutral interest rate level, but this will depend on the data," Kashkari said. The so-called neutral interest rate refers to the interest rate level that neither stimulates nor inhibits the economy.
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Kashkari believes that the current interest rate level is still braking the economy, but he also said that the strong performance of the U.S. economy during the Federal Reserve's rate hikes and since the rate cut last month indicates that today's neutral interest rate might be higher than in the past.
Kashkari once again emphasized the Federal Reserve's dual mandate, which is to keep the labor market strong while allowing inflation to fall back to the 2% target level.
Regarding faster rate cuts, Kashkari said: "If we see definitive evidence of a rapid weakening in the labor market, as a policymaker, this would tell me, 'Maybe we should lower interest rates faster than I currently anticipate.'"
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