Fed’s Kashkari:May be appropriate in the near term to adjust rates. The Fed is shifting. | investingLive

• It may be appropriate in the near term to adjust policy rate
• Economy is slowing.
• Not clear the impact of tariffs on inflation.
• The economy has held up well despite the tariffs
• we have not seen the effects of the tariffs as businesses built their inventory in anticipation.
• The Fed needs to respond to the slowing economy
• We won’t know the answer to inflation for a while, meanwhile data on slowing is clear.
• I can see two rate cuts this year.
• If inflation does rise because of tariffs, the Fed could pause or even hike.
• These tariffs affects take a lot longer to be clear. If the data is a slowing, how long can we wait for the tariff effect
• It might be better to cut and then pause for reverse a cut versus sitting here and waiting.
• The unemployment number is a very important, but Fed knows provisions are possible.
• Wage growth is declining, which would suggest the labor market is cooling
• Will not comment on the Pres. personnel choices, but does not doubt the BLS data
• Ultimately you cannot fake economic reality
• People will feel the economy. They cannot be convinced jobs or inflation data are different than what they are.

Since the US jobs report, it’s no surprise that commentary from Fed officials will shift. The Fed is data-dependent, and this piece of data came in weaker than expected. The average job gain over the last three months is just 35,000—a very different story from earlier in the year. The Fed has said they are data dependent. The data changed.

As a result of the data, market rates have come down, even though the Fed funds rate—under the Fed’s direct control—has not moved. That means the data itself is already providing some rate-driven stimulus. A Fed cut today would make headlines and shift the narrative, taking some control away from Trump. But if they cut 50 basis points now, he’d likely call for 100 basis points of cuts tomorrow. The Fed will always be chasing its tail, until that point where inflation soars and then it will be the Fed’s fault too.

This morning, White House economic advisor Hassett said that the Fed should be more like the Greenspan years. What he was alluding to was that Greenspan did change policy between meetings. Below are the intermeeting rate cuts from Greenspan and why he cut:

Greenspan’s Intermeeting Rate Cuts

1. October 15, 1998 – 25 bp cut

   • Reason: Global financial market turmoil from the Russian debt default and collapse of Long-Term Capital Management (LTCM).

   • Signal: Calmed markets during extreme volatility.

2. January 3, 2001 – 50 bp cut

3. April 18, 2001 – 50 bp cut

4. September 17, 2001 – 50 bp cut

Pattern: Greenspan used intermeeting cuts sparingly—just four times in 18+ years—and always during periods of acute financial or economic stress.

So is Hassett saying that the economy is on the verge of a crisis? What was the cause of that crisis? Could it be the uncertainty from the tariffs that has paralyzed businesses and led to a disjointed economy?

NO… it’s the Fed.