Federal Reserve officials voice support for first 50 basis point rate cut, Kashkari expects another 50 basis point cut later this year.

Minneapolis Fed President Kashkari stated in an article that he supports a 50 basis point rate cut this year and detailed his support for the Fed's substantial rate cut last week. In an article published on the Fed's website on Monday, Kashkari pointed out that the decision to cut interest rates by 50 basis points last week was supported by the fact that inflation has cooled significantly and is close to the Fed's 2% target. At the same time, signs of weakness in the labor market are beginning to emerge. "The balance of risks has shifted from high inflation to further weakening in the labor market, so there is reason to reduce the federal funds rate," Kashkari said. Before these officials made the above statements, Fed policymakers decided to cut rates by 50 basis points last week, marking a shift from fighting inflation to boosting the job market. The dot plot last week also showed that Fed officials projected a median of another 50 basis point rate cut at the remaining two meetings this year. Although Kashkari does not have a vote at this year's Federal Open Market Committee meetings, he participates in the deliberations on monetary policy. Since 2022, Kashkari has published a series of articles when the Fed began actively tightening policy to reduce inflation. It is worth noting that in May's last such article, Kashkari still suggested that policymakers might keep rates unchanged for a "considerable period of time" until they are sure that inflation is on track to reach the target. Other officials' views Hawkish Atlanta Fed President Bostic also expressed support for last week's 50 basis point rate cut in a speech on Monday. He stated that opening the rate cut cycle with a significant cut will help bring rates closer to a neutral level as the risks between inflation and employment become more balanced. Fed Governor Waller also supported the substantial rate cut at last week's meeting, stating on September 20 that due to unexpectedly favorable inflation data in recent weeks, he supported a 50 basis point rate cut. However, this contrasts sharply with Fed Governor Bowman, who voted against the decision last Friday, expressing concerns that inflation remains above the target. Her dissent made her the first Fed Governor to vote against a Fed rate decision since 2005. Furthermore, Bostic added that officials should not commit to a rapid pace of rate hikes given the uncertainty surrounding the so-called neutral rate (a level of interest rates that neither stimulates nor hinders economic activity) and concerns about the possible resurgence of inflation. "My concerns about inflation could have led me to decide on a relatively small initial rate cut last week - like 25 basis points," Bostic said in a speech prepared for an event by the European Economic and Financial Centre on Monday, "but such a move would overlook the increasing uncertainty surrounding the trajectory of labor market developments." Kashkari also believes that despite uncertainty surrounding the potential strength of the U.S. economy, consumer spending remains strong. He suggests that the neutral rate may have risen. "The longer this economic resilience lasts, the more signals I get that the temporary rise in the neutral rate may actually be more structural," Kashkari wrote. Currently, Kashkari expects the long-term federal funds rate to be around 2.9%, higher than his March forecast of 2.5%. At last week's meeting, the median estimate for this rate from all Fed officials also rose from 2.5% a year ago to 2.9%.