Fed's Kashkari: Inflation is easing. Interest rates are expected to continue to decline.

Minneapolis Federal Reserve President Neel Kashkari believes the U.S. economy is performing strongly, inflation is easing, and interest rates are expected to continue to decline. Kashkari said at a Yahoo Finance investment event in New York on Tuesday, "We continue to be surprised by the resilience of the U.S. economy. The current economic fundamentals look strong, and I am optimistic about the continuation of this trend." The Federal Open Market Committee (FOMC) lowered the federal funds rate target range by 0.25 percentage points to 4.5%-4.75% on November 7. Prior to that, the Fed had cut rates by half a percentage point in September, marking consecutive cuts after more than a year of unchanged rates. Kashkari described the current monetary policy stance as "moderately tight." He expects inflation to continue to slow towards the Fed's target of 2% annually and is "cautiously optimistic" about the U.S. labor market. The next FOMC meeting is scheduled for December 17-18. Current interest rate futures indicate a 65% probability of another 0.25 percentage point rate cut, with a 35% probability of no cut. For the FOMC to pause rate cuts in December, inflation data must significantly exceed expectations in the next month and a half. Officials will have inflation data for October and November to help them make decisions. Regarding the long-term trend of the federal funds rate, Kashkari mentioned the concept of the "neutral rate" - the theoretical level of interest rates that neither stimulate nor suppress economic activity. He noted that if productivity continues to accelerate, the current neutral rate may be higher, meaning the tightening of policy may not be as strong as expected, and there may be less room for rate cuts. Kashkari has been the president of the Minneapolis Federal Reserve Bank since 2016 and will once again become a voting member of the FOMC in 2026. As for the economic impact of possible policies in a second term for President Trump, Kashkari said it is too early to make predictions. "The Fed needs to wait for decisions from Congress and the executive branch," Kashkari said. "Then we will incorporate those policies into our analysis of economic potential, labor market, and inflation prospects. But until the policies are clear, we cannot take any action." Kashkari pointed out that raising tariffs will increase the prices of imported goods, but this may not necessarily lead to persistent inflation. "Overall, from an inflation perspective, we see tariffs as a one-time price hike," Kashkari said. "In the long term, this does not necessarily have inflationary effects... The complexity lies in the fact that if the other country takes retaliatory measures, and both sides remain at odds, then we may see longer-lasting inflation effects."