Fed’s Kashkari says June rate pause wouldn’t show end to hiking cycle
Minneapolis Federal Reserve President Neel Kashkari has reiterated the central bank’s commitment to bringing inflation under control through monetary policy tightening, and warned that his greatest fear is that the persistence of price pressures is underestimated.
Kashkari said he’s open to holding off on another interest rate hike next month, but is cautious against interpreting it as a signal to end the tightening cycle. He said it’s a “close call either way, versus raising another time in June or skipping.”
Some Fed officials have talked about skipping June’s increase altogether. Kashkari emphasized the importance of not sending a signal that the tightening cycle is done. Markets, meanwhile, are putting an 83% probability that the Federal Reserve will hold off on what would be the 11th consecutive increase when it convenes June 13-14.
Traders expect the Fed to likely cut about half a percentage point off rates before the end of this year as a nod toward inflation moving lower and the economy slowing; however, central bank officials have been unified in saying they don’t expect cuts this year. Kashkari said that if inflation doesn’t come down, he would be in favor of increasing rates again.
Kashkari’s comments came after Fed Chair Jerome Powell’s recent suggestion that the recent stresses in the banking system could slow down the economy enough that policymakers can afford to be less aggressive. Kashkari said that’s possible, but he added so far there are scant signs of a more macroeconomic impact from the recent banking problems.
The Fed’s benchmark funds rate is currently set in a target range between 5% and 5.25%. The upcoming June meeting will feature an update on the central bank’s forecasts for inflation, GDP and unemployment, as well as the “dot plot” that shows the governors’ future rate expectations.
FAQs:
What is the central bank’s commitment to bringing inflation under control?
The central bank is committed to tightening monetary policy to bring inflation under control.
What is Kashkari’s view on another interest-rate hike next month?
Kashkari said he’s open to holding off on another interest rate hike next month, but is cautious against interpreting it as a signal to end the tightening cycle. He said it’s a “close call either way, versus raising another time in June or skipping.”
What is the probability that the Fed will hold off on increasing rates in June?
According to the CME Group’s FedWatch tracker of futures prices, markets are putting an 83% probability that the Fed will hold off on increasing interest rates when it convenes June 13-14.
What do traders expect from the Fed before the year is over?
Traders expect the Fed to cut half a percentage point off rates before the end of this year as a nod towards inflation moving lower and the economy slowing.
What is the Fed’s benchmark funds rate?
The Fed’s benchmark funds rate is currently set in a target range between 5% and 5.25%.
Kashkari from the Fed claims that pausing rates in June doesn’t indicate the conclusion of the upward trend in rates.
Minneapolis Federal Reserve President Neel Kashkari has reiterated the central bank’s commitment to bringing inflation under control through monetary policy tightening. Speaking on CNBC’s “Squawk Box,” Kashkari emphasized that it is his biggest fear that the persistence of price pressures is underestimated. He also said he’s open to holding off on another interest rate hike next month, but cautioned against reading too much into a pause. Markets currently put an 83% probability that the rate-setting Federal Open Market Committee will hold off on what would be an 11th consecutive increase when it meets on June 13-14. Traders predict that the Fed will likely cut about half a percentage point off rates before the end of the year, a nod toward inflation moving lower and the economy slowing. Kashkari said that if inflation doesn’t come down, he would be in favor of increasing rates again. The Fed’s benchmark funds rate is currently set in a target range between 5%-5.25%.