Minneapolis Fed Pres. Kashkari: The most likely outlook is the Fed stands put on rates

  • Most likely Outlook is the Fed stands pat on rates
  • If disinflation comes again, that might lead to rate cuts
  • We would hike rates if needed
  • Hiking rates is not the most likely outcome, but cannot rule it out
  • The jobs report was softer than expected but still not soft
  • New rent rates seemed to have ticked up. That is a little concerning to him.
  • We would need to see multiple reports on inflation to be comfortable on cutting rates
  • In March he marked down 2 rate cuts.
  • It is possible he could remain there or go to one or none.
  • WOuld not allow the November election to impact Fed decisions
  • Data will guide the Fed on rate decisions
  • The Fed will achieve its 2% target. 3% is not good enough. The Fed is committed to it to 2% target.
  • The economy is in a good place.
  • It seems like we will go sideways for a while.
  • We may need to be more patient.
  • The bar for raising rate is quite high but not infinite.
  • Much more likely than raising rates is to keep rates where they are for longer than public expects
  • It’s not as if monetary policy is not having an effect, but just not as much of an effect as quickly as would have expected.
  • Financial markets are wired for exuberance.
  • One positive job report, and exuberance returned to financial markets
  • Could it be that we are misinterpreting the neutral rate.
  • We have not articulated to each other how we would trade off between inflation, employment goals.

Kashkari is cautious. Put him in the camp that does not see rates rising but he is pragmatic enough to not suggest that it’s not possible. He also is unsure whether to keep to cuts in place for 2024 or go all the way down to zero cuts. So the door is open for anything seems to be his theme.

This article was written by Greg Michalowski at www.forexlive.com. Source