Minneapolis Fed President Neel Kashkari said the Fed needs more evidence that inflation is trending downward before cutting interest rates.
The Federal Reserve Board kept interest rates unchanged in Rates have been held in a range of 5.25 percent to 5.5 percent since hitting a 23-year high last week. Kashkari said on CBS’ “Face the Nation” that the Fed needs more evidence that inflation is approaching its 2 percent target before cutting rates.
Brennan noted that Canada and Europe have already announced rate cuts and asked Kashkari what else would be needed to support a rate cut.
“We need more evidence to be convinced that inflation is on the way back to 2 percent,” Kashkari said. “The good news is that the job market remains strong, as this figure is coming out.”
“But there’s a really important difference between the U.S. and other countries: The U.S. has a much stronger economic fundamentals than most other developed countries in the world,” he said. “So they’re facing lower inflation and a weaker economy, whereas the U.S. has lower inflation but a stronger economy. And that’s what’s led to this divergence in monetary policy.”
He also said it was a “reasonable expectation” that the Fed would cut interest rates “once” this year, but that it would wait until December to do so.
“We’re in a very good position now to take time to gather more data on inflation, the economy and the labor market before making any decisions, so we’re in a strong position. But if there is just one rate cut, as the median suggests, it would probably be around the end of the year,” he said.
