Strong Labor Market Signals Possible Rate Cuts by End of Year, Says Fed's Kashkari
Minneapolis Federal Reserve Bank President Neel Kashkari indicated that the strong labor market and cooling inflation could lead to a modest reduction in the central bank's policy rate by year-end.
Amid uncertainties surrounding Trump administration policies, Kashkari emphasized the Fed's "wait and see" stance. With unemployment at 4% and a cooling rental market, he expressed optimism that overall inflation will trend closer to the Fed's 2% target.
"We're in a very good place to just sit here until we get a lot more information on the tariff front, on the immigration front, on the tax front, etc.," Kashkari said.
He highlighted the importance of inflation data in the coming months, stating, "If we see very good data on the inflation front while the labor market stays strong, then I think that would for me move me towards supporting easing further."
Despite potential extreme outcomes related to tariffs, immigration, and fiscal policy, Kashkari believes that inflation will continue to decline this year.
"All things equal, I would expect the federal funds rate to be modestly lower this year, at the end of this year, relative to where we are right now," he concluded.