In an interview with CNBC, the president of the Federal Reserve stated that two rate cuts this year still seem appropriate. This coincided with the admission that the U.S. economy is slowing down and that it might be time to start adjusting the monetary policy rate soon.
This suggests that Kashkari has joined a growing list of FOMC members who lean towards a Fed rate cut in September, with a current probability of 90% for a cut. He noted that the Central Bank of the United States must respond to the economic slowdown.
His statements come after the release of July employment data in the U.S., which indicated a weakening labor market. This contradicts the Fed's previous stance, which considered the labor market to be strong and that they were in a good position to postpone a rate cut until they understood the impact of Trump's tariffs on inflation.
U.S. President Donald Trump stated that the employment data was manipulated and that the economy is not in bad shape. Kashkari stated he does not doubt the data, although he refused to comment on the president's personnel decisions.
The statement from the president of the Federal Reserve Bank of Minneapolis reflects a sentiment similar to that of the president of the Federal Reserve Bank of San Francisco, Mary Daly, who indicated that the time to cut interest rates is approaching. Daly had pointed out that there are signs that the labor market is weakening.
Meanwhile, the president of the Federal Reserve Bank of San Francisco stated that there is still no evidence that price increases driven by tariffs are significantly impacting inflation. She stated that if they wait too long to see the impact of the tariffs, it might be too late to act.
Kashkari also shared a similar stance, noting that the impact of tariffs on inflation is still unclear. He added that if inflation rises due to tariffs, the Fed could pause or even raise interest rates.
This aligns with President Trump's opinion that the FOMC should cut the Fed's interest rates and that, if inflation rises, it could proceed to raise them. The president has even pushed for a cut of 300 basis points. However, it is unlikely that this will happen.
To further ensure that a rate cut occurs this September, Trump seeks to appoint a Federal Reserve governor who supports rate reduction to replace Adriana Kugler. The president revealed that he will announce his appointment later this week.
