Minneapolis Fed president anticipating two or three rate cuts in 2024

Minneapolis Fed President Kashkari said Wednesday that he expects the Fed to cut interest rates two to three times in 2024.

“As I sit here today, a couple of cuts seem appropriate to me right now,” he said on CNBC’s “Squawk Box.” “But again, I’m not going to prejudge things, but this is just my intuition based on the data we have so far.”

Kashkari does not have a vote on the Fed’s committee, which decides monetary policy, but he noted that the labor market could influence how many and how quickly rates are cut this year.

“If the labor market continues to be very strong, then we can confidently say, ‘We’ll be able to recover quite slowly from here,'” he said. “If we see a significant slowdown in the labor market, we’ll say, ‘Maybe we need to start cutting rates a little bit sooner.'”

Kashkari’s prediction of two or three interest rate cuts is roughly in line with expectations given by Fed officials in December. At the time, all but three officials said they expected at least two cuts in 2024, with the largest proportion expecting three cuts.

The Fed has kept interest rates unchanged at a range of 5.25% to 5.5% for the past four meetings, after raising them to a 20-year high last year to curb inflation.

With the central bank’s interest rate hike campaign apparently coming to an end, there is growing optimism about the possibility of rate cuts. But Fed Chairman Jerome Powell has warned in recent days that the rate cut may not happen as quickly as some are expecting.

“I don’t think it’s likely that this committee will reach that level of confidence before its March meeting in seven weeks,” Powell said in an interview on “60 Minutes” on Sunday.

“What would make us want to move sooner is if we see weakness in the labor market, if we see inflation coming down really convincingly,” he added.

January jobs data released Friday far exceeded economists’ expectations, with the U.S. economy adding 353,000 jobs last month and the unemployment rate at 3.7%.

Inflation has eased significantly since reaching a 40-year high of 9.1% in June 2022, most recently at 3.4% in December. However, it remains above the Fed’s 2% target.