Fed may need to hold rates steady all year, Kashkari says

Summary:

Neel Kashkari, President of the Minneapolis Federal Reserve, emphasized the need for the Federal Reserve to maintain steady interest rates throughout the year due to persistent inflation, partly bolstered by the strength of the housing market. In a statement at a Milken Institute conference, Kashkari pointed out that he would require multiple positive inflation metrics that indicate a successful disinflation process before considering a rate cut. Additionally, he noted that shifts in the labor market towards weakness might also justify lowering rates. However, he set a high bar for any potential rate hikes, suggesting that the Federal Reserve is more likely to maintain its current stance longer than the public might expect.

Earlier in March, Kashkari had anticipated two rate cuts during the year; however, he hinted that upcoming projections in June might reflect a reduced expectation, potentially indicating only one rate cut or possibly none at all, depending on forthcoming economic data. This cautious approach underscores the uncertainty surrounding the economic outlook and the Federal Reserve’s commitment to ensuring measured responses to economic indicators. For commercial real estate investors, this suggests a stable borrowing cost landscape in the near term, which could influence investment strategies and decisions within the real estate market.

Our take (from the Straight to Smart newsletter):

Resist the Rate Cut Hype

Article Excerpt:
May 7 (Reuters) – Stalled inflation buoyed in part by housing market strength means the Federal Reserve will need to hold borrowing costs steady for an “extended period,” and possibly all year, Minneapolis Federal Reserve President Neel Kashkari said on Tuesday.
“I would need to see multiple positive inflation readings suggesting that the disinflation process is on track” to support a rate cut, Kashkari said at a Milken Institute conference.

Click to read original Reuters article (Subscription may be required):
Fed may need to hold rates steady says Kashkari

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