Fed Doubts Grow Over December Rate Cut With Kashkari on Fence

Core Viewpoint - The President of the Federal Reserve Bank of Minneapolis, Neel Kashkari, expressed his opposition to the recent interest-rate cut by the US central bank and remains undecided on the December policy meeting's direction [1][3]. Economic Activity Insights - Kashkari noted that both anecdotal evidence and data indicated a stronger underlying resilience in economic activity than he had anticipated, suggesting a pause in rate cuts during the Fed's October meeting [2]. - He mentioned that subsequent data has shown "more of the same" for the economy, indicating a mixed outlook for the upcoming December rate decision [3]. Federal Reserve Officials' Sentiment - Kashkari's views align with other Federal Reserve officials who have recently shown skepticism regarding the necessity of another rate cut in December, with concerns about labor market weaknesses still prevalent among some policymakers [3][4]. - Financial markets have reacted to the Fed's comments, reducing the likelihood of a rate cut in December to approximately 50%, down from nearly 100% prior to the October meeting [4]. Future Rate Expectations - Following the September rate cut, Kashkari had anticipated two additional reductions in 2025, reflecting his belief that the economy was slowing more significantly at that time [5]. - He highlighted the existence of weaknesses in the labor market, particularly among low-income and sub-prime borrowers, while also noting that many corporate earnings remain strong and optimistic for 2026 [6].