Minneapolis Federal Reserve Chairman: A “further slight reduction” in the benchmark interest rate is appropriate

The Zhitong Finance App learned that on Monday, Minneapolis Federal Reserve Chairman Kashkari said that “a further slight reduction” in the central bank's benchmark interest rate seems appropriate in the next few quarters.

“Ultimately, the direction of the policy will be determined by actual economic, inflation, and labor market data,” Kashkari said at a conference in Buenos Aires, Argentina on Monday. The basic inflation rate in September was higher than expected, and the latest data from the US labor market showed that in a situation where recruitment was stable, the unemployment rate declined.

This data has led investors to withdraw their bets, believing that the Federal Reserve will not cut interest rates by 50 basis points again at the upcoming November meeting, just as policymakers did in September. Kashkari described the Federal Reserve's current policy stance as restrictive, but he said the extent of the restrictions was “unclear.”

Kashkari said the labor market is still strong, and recent employment reports are “encouraging, and the rapid weakening of the labor force does not seem to be coming soon.” He added that the inflation rate “has declined sharply from its peak, but is still slightly above our target.” Kashkari has previously said that he is satisfied with the Federal Reserve's interest rate cut in September and believes that cutting interest rates by 25 basis points each time during the remaining two meetings of this year is a “reasonable starting point.” According to the median estimate released last month, Fed policymakers expect the central bank to cut interest rates by another 50 basis points for the rest of 2024.

On Monday, the US dollar continued last week's gains, as the market expected the Fed to maintain a gradual pace of interest rate cuts, which generally supported the US dollar. The intercontinental exchange DXY dollar index rose 0.3%, erasing about two months of decline. The Wall Street Journal's dollar index rose 0.4% and also returned to August levels. The dollar rose 0.5% against the yen and 0.3% against the euro.