Fed’s Kashkari says it’s reasonable to consider rate cut next month

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

“It’s still a legitimate consideration,” Kashkari said Monday on Bloomberg Television in response to a question about whether policymakers should cut borrowing costs by a quarter of a percentage point at their final meeting of the year. “Right now, as far as I know today, a quarter point cut in December is still being considered – that’s a legitimate debate for us.”

Kashkari said the economy’s resilience in the face of rising interest rates suggests that the neutral rate, where policy neither affects nor stimulates economic growth, may now be higher. That raises questions about the extent to which monetary policy can help cool demand in the economy, he said. The longer this resilience lasts, the more he thinks the shift may be structural and not just temporary.

“That’s what I want to understand now, how much downward pressure we put on the economy and what the path of inflation is,” Kashkari said.

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

Fed officials will receive more data on inflation and the labor market ahead of their December meeting. The latest update to the Fed’s preferred price indicator will be released on Wednesday. Inflation has been inching closer to the central bank’s 2% target in recent months.

“I’m confident it’s declining moderately and the labor market remains strong at the moment,” Kashkari said.

Kashkari said that while one-time tariffs could lead to one-time price increases, instances of foreign retaliation could push prices higher.

—With assistance from Haslinda Amin.

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