Minneapolis Fed president Neel Kashkari said Monday that it’s "likely" the central bank will make "modest" interest rate reductions in the "coming quarters."
Monetary policy, he said while speaking in Argentina, remains "overall restrictive," though how restrictive is unclear to him.
The job market remains strong, he added, noting that recent data showed that a rapid weakening in that market doesn’t appear to be "imminent."
Thus, "It appears likely that further modest reductions in our policy rate will be appropriate in the coming quarters to achieve both sides of our mandate," Kashkari said.
His outlook for more "modest" cuts dovetails with a warmer-than-expected inflation reading for the month of September that offered new ammunition to those at the Fed arguing for a gradual pace of cuts.
On the Fed’s preferred "core" measure, which eliminates volatile food and energy prices, the index rose 3.3% compared with expectations of a 3.2% rise. That was up a tenth of a percent from August.
A stronger-than-expected September jobs report is also strengthening the argument by hawks on the Fed’s interest rate-setting committee that any future cuts should be gradual. The economy added 254,000 jobs last month, more than the 150,000 expected by economists. The unemployment rate also fell to 4.1% from 4.2% in August.
These voices include Fed governor Michelle Bowman, the lone dissenter on the September rate cut who wanted to move slower given her concerns about inflation.
Other Fed colleagues are arguing for gradual cuts as well.
Atlanta Fed president Raphael Bostic told the Wall Street Journal last week that he was “totally comfortable” with holding steady at the Fed's Nov. 6-7 meeting and that he had already penciled in an estimate of just one more rate cut this year.
The consensus of his colleagues is for two more 25 basis point rate cuts for the remaining two meetings this year.
New York Fed president John Williams said last week he expects that it will be appropriate to “continue the process of moving the stance of monetary policy to a more neutral setting over time."
Dallas Fed president Lorie Logan also said that “a more gradual path back to a normal policy stance will likely be appropriate from here to best balance the risks to our dual-mandate goals.”
Fed Chair Jay Powell also made it clear in remarks on Sept. 30 that the central bank isn’t in a "hurry" to bring interest rates down and would prefer smaller cuts.
He also reiterated that the consensus of Fed officials outlined at the September meeting was for two more 25 basis point rate cuts this year, saying, "It wouldn't mean more fifties."
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