Fed's Kashkari Signals Potential for Quicker Rate Cuts Amid Softening Labor Market

Minneapolis Federal Reserve Bank President Neel Kashkari indicated today that he anticipates a gradual pace of interest rate cuts in the coming quarters, but warned that a significant deterioration in the labor market could prompt him to advocate for more aggressive easing.

“If we were to see real evidence that the labor market is weakening rapidly, then that would tell me as a policymaker that maybe we should be cutting rates faster than I currently anticipate,” Kashkari said. The Fed official suggested that, for now, he believes monetary policy is still restrictive.

However, Kashkari also noted that the economy’s resilience in the aftermath of the Fed’s rate hikes and following its policy easing last month has led him to reassess his view on the so-called neutral rate of interest, suggesting it may be higher than previously thought. “We want to keep the labor market strong, and we want to get inflation back to our 2% target,” Kashkari said. The appropriate path for interest rates will “depend on the data,” he added.

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