Minneapolis Federal Reserve President Neel Kashkari stated on Sunday that it is a "reasonable prediction" for the U.S. central bank to cut interest rates once this year, potentially in December. Speaking on CBS' "Face the Nation," Kashkari emphasized the need for more evidence to ensure inflation is returning to the Fed's 2% target before any rate cuts are made. Last week, the Fed kept its benchmark policy rate in the 5.25%-5.50% range, where it has remained since last July, aiming to maintain pressure on the economy to cool inflation.
The Fed's recent projections show that the median forecast from all 19 U.S. central bankers anticipates a single rate cut this year, likely towards the end of 2023. Kashkari highlighted the importance of taking time to gather more data on inflation, the economy, and the labor market before making any decisions. Although cautious about easing monetary policy, Kashkari acknowledged the surprising resilience of the U.S. job market despite aggressive rate hikes in 2022 and 2023.
Market Overview:
- Fed's Kashkari predicts a potential rate cut in December.
- Fed maintains the benchmark policy rate at 5.25%-5.50%.
- Median forecast from Fed officials suggests a single rate cut this year.
- Need for more evidence on inflation returning to 2% target.
- Resilience of the U.S. job market amidst aggressive rate hikes.
- Unemployment rate at 4%, highest since March 2022 but below sustainable levels.
- Importance of gathering more inflation and economic data before decisions.
- Potential modest cooling of the job market expected.
- Focus on returning inflation to the Fed's 2% target for economic stability.
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