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Fed Begins Rate Cuts: Methodology and Expectations

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by Giorgi Kostiuk

a year ago


  1. Initial Rate Cuts
  2. Neel Kashkari's Expectations
  3. Statements from Raphael Bostic

  4. The Federal Reserve (Fed) of the United States has cut interest rates for the first time in over a year, initiating a new cycle of reductions. Further measures aimed at stabilizing the economy are expected.

    Initial Rate Cuts

    Last week, the Fed began its rate-cutting cycle for the first time in over a year, reducing rates by 50 basis points. This decision was driven by significant progress in reducing inflation and the risk of rising unemployment.

    Neel Kashkari's Expectations

    Minneapolis Fed President Neel Kashkari stated that he expects interest rates to reach 4.4% by the end of 2024 and 3.4% by 2025.

    Inflation has fallen significantly and is moving closer to the Fed's 2% target. At this point, the balance of risks has shifted away from higher inflation and toward the risk of further weakening of the labor market, which would require a lower federal interest rate. But I think there will be less need for aggressive discounting like the current one.Neel Kashkari

    Statements from Raphael Bostic

    Atlanta Fed President Raphael Bostic also made important statements. He voted on the FOMC this year and noted that he expects aggressive rate cuts to achieve a neutral rate.

    Progress on inflation and labor market cooling has come much faster than I had imagined at the beginning of the summer. I now expect monetary policy to normalize sooner than I had predicted a few months ago.Raphael Bostic

    The Fed is taking active steps to normalize monetary policy, guided by the latest data on inflation and the labor market. More gradual rate cuts are likely, unless significant changes occur in economic indicators.

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