Federal Reserve official: Interest rates may be cut further in the next few quarters!

Minneapolis Federal Reserve Chairman Kashkari said on Monday that as the 2% inflation target gradually becomes apparent, a “further moderate reduction” in the Fed's benchmark interest rate seems possible in the next few quarters.

Speaking at a conference hosted by the Central Bank of Argentina, Kashkari said, “Currently, it seems appropriate to moderately lower our policy interest rate in the next few quarters to achieve our two goals.”

He added, “Ultimately, the path of future policies will depend on actual economic, inflation, and labor market data.”

The US core inflation index for September was higher than expected, while the latest US labor market data showed a decline in unemployment and recruitment remained strong. These data led investors to withdraw their previous bets that the Federal Reserve would cut the benchmark interest rate by 50 basis points again at its next meeting in November.

Kashkari said that the current federal funds rate target range is between 4.75% and 5%. Monetary policy still restricts economic growth, but the exact extent of the restrictions is still unclear.

Kashkari said that the labor market is still strong, and the latest employment report shows that “the rapid weakening of the labor market does not seem to come soon.” He added that inflation “has dropped significantly from its peak, but is still slightly above our target, and the Federal Reserve is going through the final stages of reducing inflation to the 2% target.”

Kashkari said earlier that he is satisfied with the Fed's interest rate cut by 50 basis points in September, and that in the remaining two meetings of the Federal Reserve this year, cutting interest rates by 25 basis points each time is a “reasonable starting point.”

According to median estimates released last month, Fed policymakers expect the Federal Reserve to cut interest rates by a total of 50 basis points for the rest of 2024. According to CME's US Federal Reserve observation tool, federal funds futures are still priced at an 84.1% chance that the Federal Reserve will cut interest rates by 25 basis points at the November meeting. This is down from 97.4% a week ago.