Fed's 50 bps rate cut was "right decision" - Kashkari

Investing.com - The Federal Reserve’s move to cut interest rates by a half-of-a-percentage point last week was the “right decision”, according to Federal Reserve Bank of Minneapolis President Neel Kashkari on Monday.

The US central bank cut its target range for its policy rate by 50 basis points to 4.75%-5.00% last week, after leaving borrowing costs at a more than two-decade high for over a year.

This was the first reduction since March 2020, and the decision wasn't unanimous as Fed Governor Michelle Bowman preferred to lower rates by just 25 basis points.

"The balance of risks has shifted away from higher inflation and toward the risk of a further weakening of the labor market, warranting a lower federal funds rate," Kashkari said in an essay, referring to the bank-to-bank overnight lending rate that is the Fed's main policy lever. "Even after that cut, the overall stance of policy remains tight."

Kashkari is not among the Fed's 12 voting rate-setters this year, but until recently had been seen as being among the more hawkish of Fed policymakers.

In August he had said he was open to a rate cut, but indicated his preference for a smaller rate cut unless there was a quick deterioration in the labor market.

There are more Fed speakers due this week, including Atlanta Fed President Raphael Bostic on Monday, ahead of Fed Chair Jerome Powell on Thursday at the 10th annual US Treasury Market Conference.

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