Neil Kashkari, president of the Federal Reserve Bank of Minneapolis, said he did not support the US central bank’s last rate cut, but he has not yet decided on the best course of action for the December policy meeting.
Kashkari said in an interview with Bloomberg News on Thursday: “The signs we have from some scattered evidence and data suggest that the underlying resilience of economic activity is stronger than I expected.” He said this was sufficient to justify the Fed’s decision to pause rate cuts at its October meeting.
Kashkari said that since then, the available data shows that the economic situation has “basically remained unchanged”. Regarding the interest rate decision to be held on December 9th and 10th, “I can make a case for cutting rates based on the data, and I can also make a case for keeping rates unchanged. We’ll see.”
Kashkari’s remarks put him in line with a growing number of Fed officials who have cast doubt on the need for another rate cut in December and even openly opposed it. Given that many policymakers remain more concerned about a weak labor market, it remains unclear whether they can persuade enough Federal Open Market Committee members.
The president of the Federal Reserve Bank of Minneapolis does not have a vote on interest rate decisions this year, but will participate in the discussions of the Federal Open Market Committee.
Financial markets have taken note of the recent frequent remarks made by the so-called “inflation hawks” within the Federal Reserve. According to federal funds futures contracts, investors have reduced the probability of a rate cut in December to around 50%, down from nearly 100% before the Fed’s October meeting.
After the central bank’s first rate cut this year in September, Kashkari said he expects two more rate cuts by 2025. He said on Thursday that he believes the economy will slow significantly by then.
He said, “There have been many news reports about low-income borrowers – subprime borrowers, and subprime lending companies serving the subprime market – getting into trouble. This seems to indicate that there are indeed some weak links in the labor market. At the same time, many companies are doing well in terms of profits, and many are very optimistic about 2026.”
Kashkari is not the only one who hopes to see more data before the Fed’s last meeting of the year. Mary Daly, president of the San Francisco Fed, also expressed uncertainty about the meeting’s agenda earlier on Thursday.
Daly said at an event in Dublin: “It’s too early to say ‘no cuts’ or ‘definitely cuts’, and added that the direction of policy change seems ‘neutral’.”
However, some people prefer to discuss this issue at the last meeting of this year, and an increasing number of officials advocate keeping the interest rate stable.
Boston Fed President Susan Collins said Wednesday that interest rates should remain at current levels for “some time” to balance inflation, which is still at 3% and above the Federal Reserve’s 2% target, with the weak hiring in the labor market. She said that sustained strong economic growth could slow or hinder the process of easing price pressures.
Other officials who had previously held a more positive attitude towards interest rate cuts, including Chicago Fed President Austan Goolsbee, have also expressed similar views in recent weeks. They have joined the Fed’s hawkish camp, which includes policymakers such as Kansas City Fed President Jeff Schmitz, Cleveland Fed President Loretta Mester and Dallas Fed President Robert Kaplan, all of whom have warned against further rate cuts.
With the end of the government shutdown, agencies have resumed releasing official statistics, allowing Fed officials to gain a clearer understanding of the U.S. economic situation. However, it remains unclear how much new data will be available for reference before the Fed’s December meeting.
