Neel Kashkari, the President of the Minneapolis Federal Reserve, said it was a “reasonable prediction” that a single interest rate cut could take place by the end of 2024.
What Happened: Kashkari, speaking on CBS’ “Face the Nation” program, stated that it is a “reasonable prediction” that the U.S. central bank will reduce interest rates once this year, with the most likely timing being December, reported Reuters on Sunday.
He emphasized the need for more evidence to ensure that inflation is on a downward trajectory toward the 2% target. The Fed has maintained its benchmark policy rate in the 5.25%-5.50% range since July 2023 to counter inflationary pressures.
“We’re in a strong position, but if you just said there’s going to be one cut, which is what the median indicated, that would likely be toward the end of the year,” said Kashkari.
The Fed’s projections, released last week, indicated that the median forecast of all 19 U.S. central bankers was for a single interest rate cut this year. Kashkari, who has been more cautious about easing monetary policy than his peers, did not specify the number of rate cuts he personally expects.
Despite the Fed’s aggressive rate hikes in 2022 and 2023, Kashkari expressed surprise at the resilience of the U.S. job market. He anticipates a cooling in the job market and hopes for a return to a more balanced economy.
Why It Matters: Kashkari’s prediction comes amid a series of developments that have influenced the U.S. rate cut prospects. Inflation in May eased more than expected, raising hopes for a gradual return to the Fed’s 2% target. This led to an increased expectation for a September rate cut and bolstered bets on a double rate cut by year-end.
However, the Fed’s decision to hold rates steady in June, coupled with a slightly higher inflation outlook, delivered a hawkish surprise to the markets. Despite this, Goldman Sachs reaffirmed its forecast for two interest rate cuts in 2024, starting in September, citing the cumulative progress on inflation.
These developments have led to a speculation about the Fed’s next move in the context of other central banks, such as the Bank of Canada and the European Central Bank, which have already initiated a phase of policy easing.
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This story was generated using Benzinga Neuro and edited by Shivdeep Dhaliwal
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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