Fed’s Kashkari Backs Sentiment That Policymakers Can Take Their Time Cutting Interest Rates

• Minneapolis Federal Reserve President Neel Kashkari suggests that despite interest rates being at their highest in about 23 years, they are not harming the economy. This situation could provide policymakers with more time before deciding on potential rate cuts.
• He further argues that recent economic developments indicate that the Federal Reserve's policy is not as restrictive on growth as it may seem. The longer-run "neutral" rate, which is neither restrictive nor stimulative, is likely higher than before the Covid-19 pandemic.
• Kashkari notes that what might appear to be a tight monetary policy based on historical trends may not be the case currently. Nominal rates could stay higher for a longer period without adversely affecting the economy.
• The assessment suggests that the current monetary policy stance may not be as tight as previously assumed, giving the Federal Open Market Committee (FOMC) time to assess economic data before considering rate cuts. This has implications for when, how much, and how quickly the Fed should adjust rates.
• Kashkari's comments align with recent statements from Federal Reserve Chair Jerome Powell, who indicated a reluctance to cut rates in the near term. Powell emphasized the positive economic outcomes despite past rate hikes, supporting the idea that the current policy stance may not be overly restrictive.

(Source: CNBC)