Fed's 50 bps rate cut was "right decision" - Kashkari

Federal Reserve’s Interest Rate Cut: Neel Kashkari’s Perspective

Investing.com – The Federal Reserve’s decision to cut interest rates by half a percentage point last week was deemed the “right decision” by Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, on Monday.

The US central bank lowered its target range for its policy rate by 50 basis points to 4.75%–5.00%, breaking a more than two-decade-high borrowing cost that had been maintained for over a year.

This marks the first reduction since March 2020, although the decision was not unanimous; Fed Governor Michelle Bowman advocated for a more conservative cut of just 25 basis points.

Kashkari noted, “The balance of risks has shifted away from higher inflation toward the risk of a further weakening of the labor market, warranting a lower federal funds rate,” addressing concerns over the bank-to-bank overnight lending rate that the Fed uses as its main policy tool. He emphasized that despite this cut, the overall policy stance remains tight.

Although Kashkari is not part of the Fed’s 12 voting rate-setters this year, he has previously been considered among the more hawkish policymakers. In August, he expressed openness to cutting rates but favored a smaller reduction unless the labor market deteriorated quickly.

Additional Fed speakers are scheduled for this week, including Atlanta Fed President Raphael Bostic on Monday, leading up to Fed Chair Jerome Powell’s address on Thursday at the 10th annual US Treasury Market Conference.