US Markets
Wednesday, February 7th, 2024 3:54 pm EDT
Key Points
- Neel Kashkari, Minneapolis Federal Reserve President, anticipates only a few rate cuts this year, contrary to the aggressive path projected by markets, suggesting two or three cuts as appropriate based on current data.
- Market expectations include the first rate reduction potentially as soon as May and a total of five quarter percentage point cuts by year-end, according to the CME Group’s FedWatch measure of futures pricing, but multiple Fed officials, including Fed Chair Jerome Powell, have been pushing back on this narrative.
- Kashkari emphasizes the importance of assessing actual inflation data to guide rate decisions, noting resoundingly positive data thus far and suggesting the possibility of a longer, higher rate environment going forward.
Minneapolis Federal Reserve President Neel Kashkari expressed his expectation for the central bank to enact only a few rate cuts this year, a stance divergent from market projections. During a CNBC “Squawk Box” interview, Kashkari suggested that his inclination leans towards two or three rate cuts based on current data. This contradicts the market’s anticipation of an aggressive rate reduction path, with expectations of the first cut potentially as soon as May and five quarter percentage point cuts by year-end, as indicated by the CME Group’s FedWatch measure of futures pricing. However, Kashkari’s sentiment aligns with other Fed officials, including Fed Chair Jerome Powell, who recently indicated a cautious approach to rate adjustments, emphasizing the importance of monitoring inflation and economic growth closely. Kashkari emphasized the need to base rate decisions on actual inflation data, noting the positive economic indicators thus far. As a nonvoting member of the rate-setting Federal Open Market Committee (FOMC) this year, Kashkari’s perspective contributes to the broader discussions within the Fed. In a recent essay, Kashkari argued that the real fed funds rate, adjusted for inflation, might not be as high as perceived, citing solid economic data despite recent rate hikes. He highlighted robust labor market growth and sustained consumer spending as factors suggesting that monetary policy might not be exerting as much downward pressure on demand as anticipated. Kashkari’s assessment indicates a preference for a gradual approach to rate adjustments, allowing more time to evaluate economic data before considering further rate reductions.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/02/07/feds-neel-kashkari-expects-only-two-or-three-interest-rate-cuts-this-year.html
