- ORIGINAL NEWS
Fed’s Kashkari backs sentiment that policymakers can take their time cutting interest rates
- SUMMARY
Minneapolis Fed President Neel Kashkari believes that the U.S. economy is handling high-interest rates well.
The Fed has a neutral rate that neither restricts nor stimulates the economy, typically estimated at 0.5%.
However, the data suggests higher rates won’t harm the economy and might actually be the new neutral rate.
Holding higher rates longer won’t necessarily hurt the economy, giving the Fed more time to evaluate economic data before decreasing rates.
Despite recession fears, the U.S. economy has performed well in 2023, with solid payroll growth and easing inflation.
Kashkari pointed to indicators such as business investment, big-ticket purchases, and moderated housing data to support his stance.
He acknowledged that the data isn’t completely positive and will monitor indicators of potential economic stress.
Although markets anticipate a significant rate cut, Kashkari and other Fed officials suggest a slower approach due to the economy’s resilience.
- NEWS SENTIMENT CHECK
- Overall sentiment:
positive
Positive
“Interest rates running at their highest levels in about 23 years are not hurting the economy and could buy policymakers more time before deciding whether to cut, Minneapolis Federal Reserve President Neel Kashkari said Monday.”
“More specifically to Kashkari’s argument, Powell noted that the negative effects he feared from the series of rate hikes the Fed implemented have not come to pass.”
Negative
“Despite widespread expectations for a recession, the U.S. economy as measured by gross domestic product grew at a 2.5% annualized pace in 2023.”
“Kashkari did note that the data is not “unambiguously positive” and he will be watching items such as loan and credit card delinquencies for evidence of economic stress.”