Fed's Kashkari says it's possible he pencils in only one interest-rate cut this year

By Greg Robb

Minneapolis Fed president says had expected two cuts, but may reduce that; in any case, no need for the Fed to cut quickly, he says

Minneapolis Fed President Neel Kashkari said Wednesday that he had penciled in two interest-rate cuts in 2024 during the central bank's last forecasting round in December, but added he may reduce the number of cuts he expects at the Fed's next meeting in two weeks.

The median forecast of Fed officials, released in December, was for three rate cuts, and Kashkari's support for only two puts him on the hawkish end of the spectrum of Fed officials.

Fed officials will update their forecasts at the March 19-20 meeting.

Asked Wednesday during an interview webcast by the Wall Street Journal about what his policy path will be at the March meeting, Kashkari replied: "It is hard for me, with the data that have come in, that I would be saying more cuts than I said in December," Kashkari said.

"It seems the base case: I'd be where I was in December, or potentially one fewer. But I haven't decided," he said.

The Minneapolis Fed president said that the Fed's actual path on rates will be determined by how inflation data comes in.

Stepping back, if the economy and the labor market stay strong and inflation continues to come down, there is an argument for holding policy steady, Kashkari said.

While some would argue for rate hikes in that circumstance, others might ask "why do anything?" Kashkari said, on the theory that maybe the economy can sustain those rates.

In other words, "we thought we had two feet on the brakes, but maybe we have only one foot on the brakes," Kashkari said.

Kashkari said he was not sure how this was going to "shake out."

But there is no reason for the Fed to move quickly, he said. "We have time to get more data before we have to start dialing back policy."

While he wouldn't take rate hikes completely off the table, Kashkari said he was not contemplating higher rates.

"I think the base-case scenario is we don't have further raising of the federal funds rate to go. If the economy continues to be more resilient than we expect, and if inflation seems more entrenched, the first thing we would do is keep rates where they are indefinitely, as long as necessary, to try to bring inflation down to target," he said.

Earlier Wednesday, Fed Chair Jerome Powell said he expected rate cuts this year if the economy evolves as expected, but said the central bank wanted to see a "little bit" more inflation data to be confident that inflation was coming down toward the central bank's 2% target.

-Greg Robb

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03-06-24 1851ET

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