Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, indicated that the interest rate may be lower than its current level by the end of 2025.
Neel Kashkari, President and CEO of the Federal Reserve Bank of Minneapolis, provided uncommon insights into the central bank’s prospective future monetary policy decisions in a surprising development. Kashkari suggested that he would favor additional interest rate reductions if inflation remains controlled and the labor market remains robust.
Interest rates may decrease by the conclusion of the year: Neel Kashkari
Today, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, provided an interview with CNBC to discuss his perspectives on potential interest rate reductions. Kashkari anticipates that inflation will persist in its downward trajectory toward the bank’s 2% objective. This opens the door for a modest reduction in the interest rate by the end of the year. He proposed, “I anticipate the federal funds rate will be slightly lower after this year.”
It is worth noting that Kashkari expressed uncertainty regarding the prospective impact of US President Donald Trump’s new policies on the economy and inflation. These policies, which encompass tariffs, tax cuts, and more stringent immigration controls, can potentially have significant repercussions.
Further, Kashkari emphasized the necessity of caution, urging a wait-and-see approach. This may enable the Federal Reserve to accumulate additional data and evaluate the potential influence of the policies on economic growth and inflation.
The Labor Market Insights of the Minneapolis Fed Chief
Although the central bank president’s interview occurred shortly after the release of the US employment report, he underscored the labor market’s healthy state. The unemployment rate has remained at 4%. At the same time, nonfarm payrolls have increased by a modest 143,000, indicating that the labor market is beginning to decline.
Neel Kashkari expressed his thoughts on the labor data, which was less than anticipated, as follows:
This is still a good labor market. It’s not as hot as it was a year or two ago, the economy is strong, businesses are optimistic.
The Bank of England recently announced that the interest rate would be reduced to 4.5%, the lowest since June 2023. As per the Monetary Policy Committee, two additional interest rates may be sufficient to address inflation.
Can the Federal Reserve further reduce interest rates?
The Federal Reserve intended to maintain interest rates at the 4.25% to 4.5% level following the two-day FOMC meeting. In the interview, the central bank president stated that he would advocate for additional cuts if the inflation data appears optimistic and the labor market remains robust.
Additionally, Neel Kashkari thinks that the economy’s ability to withstand high interest rates may suggest a higher neutral rate. The neutral rate is the threshold at which interest rates do not facilitate or impede economic expansion.
What is the cryptocurrency market’s response to Neel Kashkari’s insights?
The crypto market is currently showing a minor recovery from the recent turmoil. Over the past day, there has been a slight increase of 1.48% in the total market capitalization of $3.22 trillion. A significant increase of 11% has also been observed in the 24-hour trading volume, which currently stands at $132.64 billion.
Nevertheless, the most prominent cryptocurrencies, such as Bitcoin and Ethereum, have experienced substantial declines of 6.6% and 19.5% in the past week. Over the same period, XRP, Solana, and BNB have also experienced significant declines, with a 20.5%, 17.2%, and 14.8% decline, respectively.
The Federal Reserve’s potential decision to further reduce interest rates may affect the crypto market, as Neel Kashkari has indicated.
