Fed’s Kashkari sees two cuts in 2024, potentially one

Kashkari said he expects his forecast to show the same number “or potentially one fewer” when Fed officials submit new projections at their mid-March meeting. — Bloomberg

WaShington: US Federal Reserve Bank of Minneapolis president Neel Kashkari said he expects the US Federal Reserve (Fed) to cut interest rates two times – or potentially just once – in 2024, but emphasised he hasn’t finalised his forecasts for the Fed’s upcoming meeting.

When policymakers last released rate forecasts in December, Kashkari said he projected two rate cuts for this year.

Speaking at an event hosted by the Wall Street Journal on Wednesday, he said he expects his forecast to show the same number “or potentially one fewer” when Fed officials submit new projections at their mid-March meeting.

“It’s hard for me to see the data that have come in that are saying more cuts than I said in December,” Kashkari said.

“At a base case where I was in December, or potentially one fewer, but I haven’t decided yet. It is going to be determined by the inflation data that we see,” he said.

Fed officials have held rates steady at a two-decade high since July, and said they aren’t in a hurry to lower them until they have more confidence inflation is on track to their 2% goal. Policymakers pencilled in three rate cuts for 2024 when they met in December, according to the median projection.

They’ll update those rate projections at their March 19-20 meeting.

The Minneapolis Fed chief, who doesn’t vote on monetary policy this year, also said continued strength in the labour market and economic growth suggests high rates may not be doing much to restrain the economy.

“If we have a run rate that’s very attractive, people have jobs, businesses are doing well, inflation is coming back down, why do anything?” he said.

Kashkari said he is paying close attention to incoming inflation data, noting that he wants to see inflation continue to trend lower.

But even if price growth begins to accelerate, he said, increasing interest rates wouldn’t be the Fed’s first plan of attack.

“If we start to see multiple high inflation prints and inflation starts to flare back up again, that could justify us going and raising rates further from here, but I think the first thing we would do is just hold policy at this level for an extended period of time,” he said. — Bloomberg