Minneapolis Federal Reserve President Neel Kashkari has expressed his support for two interest rate cuts by The Fed this year. He also commented on the state of the US economy after the July jobs report was released.
In an interview with CNBC, Kashkari said that two interest rate cuts this year are still worth considering. He acknowledged that the US economy is slowing down, and it may be time to start adjusting monetary policy rates in the near future.
The statement shows that Kashkari is now among the group of Federal Open Market Committee (FOMC) members who are increasingly inclined to support a rate cut as early as September, with the possibility of such a move now reaching 90%. According to him, the central bank needs to respond to the economic slowdown.
His comments come after the US jobs report for July showed the labor market weakening and contradicted the Fed’s previous stance that the labor market remains strong and interest rates can be maintained while the impact of Trump’s tariffs on inflation is fully understood.
U.S. President Donald Trump has claimed that the jobs data has been manipulated and that the economy is not as bad as it is being portrayed. Kashkari stressed that he does not doubt the data, but declined to comment on the president's appointments.
Kashkari's statement is in line with the views of San Francisco Fed President Mary Daly, who also said that the time for a rate cut is approaching. Daly said there are signs that the labor market is weakening.
Daly also said that there is no strong evidence so far that price increases due to tariffs have a significant impact on inflation. He said that if the Fed waits too long to assess the impact, it may be too late.
Kashkari also shared the same view, saying that the impact of tariffs on inflation is still unclear. If inflation increases due to tariffs, the Fed could consider stopping the rate cut or even raising it again.
This view is in line with President Trump's wishes, who wants interest rates to be reduced, but is willing to accept another increase if inflation increases. Trump has even called for a rate cut of 300 basis points, a step that most observers consider unrealistic.
To ensure a rate cut in September, Trump is planning to nominate a new Fed governor who supports lower rates to replace Adriana Kugler. He is expected to announce his choice this weekend.
