Fed's Kashkari Open To Idea Of Moving Slow On Rates But Does Not Support Pivot

Minneapolis Fed President Neel Kashkari, a member of the Federal Open Market Committee, the monetary policy setting arm of the central bank, hinted at favoring a pause on a rate hike at the upcoming June meeting.

What Happened: “I’m open to the idea that we can move a bit more slowly from here,” Kashkari said in an interview with the The Wall Street Journal.

The Fed has been raising the fed funds rate since March 2022 in response to rising inflationary pressure. At the May meeting, the central bank hiked the key rate by 25 basis points to a 16-year high of 5-5.25% but left out the reference to the need for “additional policy firming” in the post-meeting policy statement.

“I would object to any kind of declaration that we're done. If the committee chooses to skip a meeting because we want to get more information, I could make the argument why that makes sense,” Kashkari said.

“A skip to get more information is very different in my mind than [saying], ‘Hey, we think we're done.'”

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The Fed president also said he is wary of a potential credit crunch from higher bank funding costs due to the collapse of three mid-sized regional banks since March.

“And then you add the uncertainties about the banking sector, and are the stresses really behind us? Are there more stresses yet to emerge? I think that does give us some reason to say, ‘Hey, let's go a little bit slower,'” he said.

Why It's Important: Fed officials have shared mixed opinions since the May meeting. While some have opined that inflation and economic activity haven’t slowed enough to warrant a pause, others have expressed a willingness to wait and watch the effects of the rate hikes implemented thus far.

Many, including Ark Invest founder Cathie Wood and Tesla CEO Elon Musk, have slammed the Fed for risking an economic collapse with its aggressive rate increases. They contend that the Fed is acting based on the consumer price index, which is a lagging indicator.

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