"High Possibility of Interest Rates Staying at Current Levels for a Long Time"
Neel Kashkari, president of the Minneapolis Federal Reserve Bank and a prominent hawkish (favoring monetary tightening) figure in the U.S. Federal Reserve (Fed), stated that he does not rule out the possibility of raising the benchmark interest rate if inflation stagnates at around 3%.
On the 7th (local time), Kashkari attended the 'Milken Global Conference 2024' held at the Beverly Hilton Hotel in Los Angeles (LA), USA, and said, "I believe there is a high need for interest rates to remain at the current level for an extended period."
He added, "I think it is likely that rates will stay at this level much longer than we currently expect or the public anticipates until we can confirm the effects of monetary policy," and said, "Although it is not the most likely scenario, we cannot completely rule out (raising rates)." However, he noted, "The level we can raise is quite high but not infinite," and added, "There are limits to how much more we can do."
Kashkari also mentioned that the Fed's current monetary policy may not be sufficiently restrictive. In a post on the Minneapolis Fed website that day, he pointed out, "Recent data, from a strong housing market to persistent strong demand, suggest that the Fed's policy may not be as restrictive as officials think," and said, "Inflation could stabilize at around 3%."
However, Kashkari also stated that rate cuts could be possible if inflation declines.
At the conference, he explained, "If inflation starts to fall again or the labor market weakens, rate cuts are also possible," and added, "We need to see multiple reports indicating that inflation is falling back toward the Fed's 2% target."
He was reserved when asked about the interest rate path for this year.
He said, "As of March, I penciled in two rate cuts by the end of this year, but I am not sure where we will be in June," adding, "We could stay at two cuts or even go to zero cuts. We need to look at the data comprehensively."
Kashkari's remarks contrast with the dovish (favoring monetary easing) messages from Fed officials the previous day, who viewed current rates as sufficiently restrictive.
John Williams, president of the New York Federal Reserve Bank, attended the Milken Global Conference the day before and said, "The current monetary policy is in a very good place," and "I expect to cut the benchmark interest rate." He stated, "I am looking at all the data," indicating that future monetary policy decisions will be based on incoming indicators. Thomas Barkin, president of the Richmond Fed, also said the previous day at the Rotary Club in Columbia, South Carolina, "I am optimistic that the current restrictive rate levels will suppress demand and bring inflation back to target levels."
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