Fed's Neel Kashkari Advocates For No Interest Rate Cut Until 'We Get A Lot More Data To Convince Us' Amid Inflation Uncertainty

In a recent podcast, Neel Kashkari, the President of the Federal Reserve Bank of Minneapolis, has called for a prolonged period of unchanged interest rates. He has warned that any reduction before inflation is tamed could jeopardize the foundation of U.S. prosperity.

What Happened: Kashkari, in an interview with the FT podcast The Economics Show, stated that the current economic conditions in the U.S. are robust, with a strong labor market and a downward trend in inflation. He believes that a significant portion of the population is discontent due to the high inflation they have been experiencing.

He has suggested that the U.S. economy’s strength allows for more time to gather evidence on whether the sharp decline in inflation during the second half of 2023 has halted.

"Right now, my best guess is we would leave [rates] here for an extended period of time until we get a lot more data to convince us, one way or the other, is underlying inflation really on its way down," Kashkari said.

"Anchoring of inflation expectations has been a foundation of a lot of the economic prosperity that America has enjoyed in the ensuing 40 years."

"I would be very cautious about putting that at risk."

See Also: Fed’s Preferred Inflation Gauge Matches Estimates; Personal Spending Slows More Than Predicted (CORRECTED

Despite his hawkish views, Kashkari does not have an FOMC vote this year.

See Also: Are Rate Cuts Finally Coming After Fed’s Preferred Inflation Data Holds Steady? ‘Be-Careful-What-You-Wish-For Moment’

Why It Matters: The U.S. Federal Reserve has been under pressure to consider interest rate cuts due to the steady trend in the Personal Consumption Expenditure (PCE) price index, a preferred inflation gauge for the Fed. The headline inflation rate was reported at 2.7%, while the core PCE inflation remained at 2.8% in April, slightly easing concerns about broader price pressures.

Some economists believe that the U.S. economy’s slowest growth rate since the second quarter of 2022, as indicated by the first quarter GDP data, should ease the pressure on the Fed to cut interest rates. However, Kashkari’s recent comments highlight the Fed’s concerns about the potential risks of lowering interest rates before inflation is under control.

Read Next: Jamie Dimon Says ‘World’s Just Not Ready For’ Potential Stagflation: ‘If Things Get Worse…’

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari