Federal Reserve Bank of Minneapolis President Neel Kashkari said that policymakers should carefully examine inflation data before deciding on Fed rate cuts in 2024.
Neel Kashkari on Fed Rate Cuts in 2024
According to Neel Kashkari, the economy has been remarkably resilient. The labor market, especially in services, has remained strong. He advised that while future policy options should stay open, the Fed rate cuts should occur after policymakers take a wait-and-see approach.
Kashkari said most expected a recession by the end of last year, but instead, there was strong growth. US consumers and the housing market have been resilient, so there is no rush for Fed rate cuts in 2024. He emphasized taking time to make the right decisions.
Neel Kashkari, on Fed rate cuts, said that inflation had stayed flat at the start of this year. This made him wonder if the disinflation process was continuing or if the economy was settling at around 3% inflation. He added that it is too early to be sure, so he needs to wait for more data before introducing Fed rate cuts in 2024.
Even though Kashkari will not be voting on policy this year, he thinks policymakers should not rule anything out before the rate cuts in 2024. He added that the Federal Reserve is committed to bringing inflation back to its 2% target.
When to Expect Fed Rate Cuts in 2024?
The US economy has been going against the predictions of a slowdown or recession due to a strong job market and solid consumer spending. However, this strength has raised concerns that the Federal Reserve will delay lowering borrowing costs and might not introduce rate cuts in 2024.
Minutes from the central bank’s May meeting showed a possible step to tighten policy further if inflation risks arise. However, they also preferred to wait and see before making any near-term interest-rate decisions.
Fed officials will release new growth and inflation forecasts, known as dot plots, after their next meeting on June 12. Markets expect a revision of the earlier prediction of three rate cuts in 2024. There is increasing speculation that the Fed may not introduce any rate cuts in 2024 unless there is a significant drop in hiring or a geopolitical shock.
S&P Global’s PMI survey for May, released last week, showed the largest increase in over two years. This is due to an increasing services sector and slightly better manufacturing. It also came along with April’s durable goods orders, which increased by 0.7%.
The Atlanta Fed’s GDPNow tool, updated late Friday, forecasts a growth rate of 3.5% for the current quarter. This is more than double the 1.6% pace seen in the year’s first three months.
Goldman Sachs withdrew its prediction for a rate cut in July, which was unusual compared to other forecasts on Wall Street. They mentioned that four more CPI reports would be available by the September meeting and suggested that if inflation remains in the expected range, most FOMC members might back a rate cut.
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