It is reasonable to consider a rate cut next month, says the Fed’s Kashkari

(Bloomberg) — Federal Reserve Bank of Minneapolis President Neel Kashkari said it is still appropriate to consider another rate cut at the central bank’s December meeting.

“It’s still a reasonable consideration,” Kashkari said on Bloomberg Television on Monday in response to a question about whether policymakers should cut borrowing costs by a quarter point at their final meeting of the year. “At this point, knowing what I know today, and still considering a 25 basis point cut in December, it’s a reasonable debate for us.”

Kashkari said the economy’s resilience in the face of higher interest rates suggests the neutral rate, where policy does not depress or boost growth, could now be higher. That raises questions about the extent to which monetary policy is helping to cool demand in the economy, he said. The longer the resilience lasts, the more he thinks the change will be structural and not merely temporary.

“This is what I’m trying to understand now: how much downward pressure we’re putting on the economy, and what the path is for inflation,” Kashkari said.

Policymakers have cut rates by three-quarters of a percentage point in recent months, including a larger-than-usual half-point cut in September. They will meet again from December 17 to 18. Some officials have expressed support for a more gradual pace of rate cuts going forward.

Fed officials will receive more data, both on inflation and the labor market, before their December meeting. The latest update on the Fed’s preferred price gauges will be published on Wednesday. Progress on inflation, which has been moving closer to the central bank’s 2% target, has slowed in recent months.

“I have some confidence that the trend is slowly going down, and that the labor market remains strong at this point,” Kashkari said.

Kashkari said that while one-off tariffs would likely lead to a one-time price increase, a situation involving retaliation from abroad could push up prices.

–With help from Haslinda Amin.

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