Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, made remarks suggesting that the Federal Reserve might hold off on cutting interest rates this year if inflation remains elevated. His comments come as inflation has proven more persistent than initially expected, even as the Fed has aggressively raised rates to curb price increases.
Kashkari indicated that while some progress has been made, the Fed is closely watching inflation trends. If inflation shows signs of stalling rather than declining further, the Fed may opt to keep rates higher for longer to avoid undermining its progress in bringing inflation back to the 2% target. This cautious stance reflects the central bank’s ongoing dilemma: balancing efforts to cool inflation without tipping the economy into a recession .
This outlook is shared by other Fed officials, who have highlighted the importance of closely monitoring inflation data before making any moves to lower rates. While some analysts had predicted rate cuts could start by late 2024, the risk of entrenched inflation is leading to more cautious expectations for monetary policy adjustments.
