Kashkari Takes Hawkish Stance At Fed, Expects Further Rate Hikes And No Cuts In 2024

Following James Bullard‘s resignation in August, the former President of the St. Louis Federal Reserve, Neel Kashkari, has assumed the position of spearheading the more hawkish members on the Federal Reserve’s board.

Kashkari‘s recent statements clearly have revealed his robust inclination towards additional interest rate hikes and a commitment to keeping them at high levels over an extended duration, positioning him as one of the most hawkish figures on the board.

In an interview with CNN on Wednesday, Kashkari expressed concerns that if interest rate increases aren’t having the expected dampening effect on the economy, there’s a risk they may need to be raised even further.

During the Fed’s latest meeting on Sept. 20, the updated economic projections revealed a median preference for another rate hike in 2023, along with a projection of 50 basis points in rate cuts for 2024. These cuts have been trimmed from the previous projection of a full percentage point of rate reductions made back in June.

The Fed upgraded the GDP growth rate forecasts for 2023, up from 1.1% in June to 2% in September.

Kashkari Doesn’t Expect Any Rate Cuts In 2024

In an appearance on CNBC, Kashkari questioned whether the Fed’s current policy stance was restrictive enough, citing economic data that suggests it might not be as tight as it seems.

Kashkari also signaled his preference for the Fed to maintain steady rates next year.

The Minneapolis Fed President reiterated that the Fed’s goal isn’t to trigger a recession, but cautioned that factors like a government shutdown or an auto strike could slow the economy, potentially reducing the need for aggressive rate hikes. He also noted that higher oil prices alone wouldn’t warrant more rate hikes.

Just a day before these remarks, Kashkari had given nearly a 50-50 chance that interest rates might need to rise significantly to combat inflation, highlighting the ongoing challenge of managing the economic landscape.

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Market Reactions

The U.S. dollar gained further on Wednesday, with the U.S. dollar index (DXY) as tracked by the Invesco DB USD Index Bullish Fund ETF UUP rising 0.2%, on track for its fourth straight session of gains. The greenback is also on its eleventh positive weeks, a winning streak unseen since July 2014.

The SPDR S&P 500 ETF Trust SPY is up 0.4% in the premarket trading, after closing 1.5% lower on Tuesday.

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