Minneapolis Fed President Neel Kashkari stated Friday that the U.S. labor market remains strong, and if inflation continues to decline, the Federal Reserve’s policy rate could be “modestly” lower by year-end.
For now, the Fed remains in “wait and see” mode, assessing the economic impact of Trump administration policies. With unemployment at 4% and a cooling rental market helping to curb inflation, Kashkari believes the central bank is in a good position to hold rates steady. “We’re in a very good place to just sit here until we get a lot more information on the tariff front, on the immigration front, on the tax front, etc.,” he told CNBC.
He emphasized that the next two months of inflation data will be crucial in shaping Fed policy. If inflation data is favorable while the labor market stays strong, Kashkari said he would lean toward supporting rate cuts.
“Barring something really surprising on the tariff, immigration, or fiscal policy front—so taking off some extreme outcomes—I think inflation will continue to come down this year,” he said. “All things equal, I would expect the federal funds rate to be modestly lower at the end of this year than where we are right now.”
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