Fed’s 50 Bps Rate Cut Was the “Right Decision” – Kashkari

The Federal Reserve’s decision to lower interest rates by half a percentage point last week has been deemed the “right decision” by Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, in a statement on Monday.

The US central bank reduced its target range for the policy rate by 50 basis points to 4.75%-5.00% after maintaining borrowing costs at a two-decade high for over a year.

This marks the first reduction since March 2020, and the choice was not unanimous; Fed Governor Michelle Bowman advocated for a more modest reduction of 25 basis points.

Kashkari indicated that “the balance of risks has shifted away from higher inflation and toward the risk of a further weakening of the labor market, warranting a lower federal funds rate.” He noted that even with this reduction, the overall policy stance remains tight.

Although Kashkari is not part of the Fed’s 12 voting members this year, he has been previously viewed as one of the more hawkish policymakers. In August, he expressed openness to a rate cut, although he preferred a smaller adjustment unless there was a swift decline in the labor market.

Additional Fed officials are scheduled to speak this week, with remarks from Atlanta Fed President Raphael Bostic on Monday and Fed Chair Jerome Powell on Thursday at the 10th annual US Treasury Market Conference.