Fed’s Kashkari: I see modest cuts over the next quarters

Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari noted on Monday that while the Fed is on the lookout for a rapid destabilization in the US labor market, investors should expect a modest pace of rate cuts over the next few quarters.

Key highlights

We definitely want to avoid recession, saw signs of labor market weakening, that’s why the Fed cut by 50 bps.

Resilience makes me wonder if the neutral rate is higher.

Evidence of quick labor market weakening could lead to faster rate cuts.

Right now, I see modest cuts over the next quarters.

It has been surprising that geopolitics hasn’t had more oil impact.

By many measures, excess savings have been spent down.

Monetary policy’s role in bringing down inflation was probably mainly in anchoring inflation expectations, not in reducing demand.