As concerns grow over an economic slowdown, calls for rate cuts are increasingly being heard within the Fed. Minneapolis Fed President Neel Kashkari has joined this chorus.
Kashkari Backs Rate Cuts
In a recent interview, Kashkari noted that the Fed may need to cut interest rates soon due to increasing signs of a slowing economy. He pointed to softening job data and overall economic slowdown, stating that the Fed cannot afford to wait too long for tariff clarity.
Rate Cut Odds Increase
According to the CME FedWatch Tool, the odds of a rate cut in September have climbed over 93%. Kashkari stated that two rate cuts this year still seem like a reasonable path. However, he highlighted that if new tariffs begin driving inflation up more than expected, the Fed may need to pause or even raise rates.
Risks of Delaying Rate Cuts
San Francisco Fed President Mary Daly also mentioned that the time for interest rate cuts is approaching, possibly necessitating more than two cuts this year. She warned that waiting too long could be risky. Despite the Fed holding rates steady at 4.25-4.50% during the last meeting, the views of two top officials diverged.
The evolving market situation and the actions of high-ranking officials indicate a growing consensus within the Fed regarding the need for rate cuts, which may significantly impact future U.S. monetary policy.
