Finance

Minneapolis Fed President Kashkari sees slower pace of rate cuts ahead

Published

8 months ago

September 23, 2024

Minneapolis Fed President Neel Kashkari: Fed is likely to make smaller rate moves going forward

Minneapolis Federal Reserve President Neel Kashkari said Monday that he expects policymakers to dial down the pace of interest rate cuts after last week’s half percentage point reduction.

“I think after 50 basis points, we’re still in a net tight position,” Kashkari said in a CNBC “Squawk Box” interview. “So I was comfortable taking a larger first step, and then as we go forward, I expect, on balance, we will probably take smaller steps unless the data changes materially.”

In a decision that came as at least a mild surprise, the rate-setting Federal Open Market Committee on Wednesday voted to reduce its benchmark overnight borrowing rate by half a percentage point, or 50 basis points. It was the first time the committee had cut by that much since the early days of the Covid pandemic, and, before that, the financial crisis in 2008. One basis point equals 0.01%.

While the move was unusual from a historical perspective, Kashkari said he thought it was necessary to get rates to reflect a recalibration of policy from a focus on overheating inflation to more concern about a softening labor market.

His comments indicate the central bank could move back to more traditional moves in quarter-point increments.

“Right now, we still have a strong, healthy labor market. But I want to keep it a strong, healthy labor market, and a lot of the recent inflation data is coming in looking very positive that we’re on our way back to 2%,” he said.

“So I don’t think you’re going to find anybody at the Federal Reserve who declares mission accomplished, but we are paying attention to what risks are most likely to materialize in the near future,” he said.

As part of the committee’s rotating schedule, Kashkari will not get a vote on the FOMC until 2026, though he does get a say during policy meetings.

The rate cut Wednesday signaled that the Fed is on its way to normalizing rates and bringing them back to a “neutral” position that neither pushes nor restricts growth. In their latest economic projections, FOMC members indicated that rate is probably around 2.9%; the current fed funds rate is targeted between 4.75% and 5%.

Speaking separately Monday, Atlanta Fed President Raphael Bostic indicated he expects the Fed to move aggressively in getting back to a neutral rate.

“Progress on inflation and the cooling of the labor market have emerged much more quickly than I imagined at the beginning of the summer,” said Bostic, who votes this year on the FOMC. “In this moment, I envision normalizing monetary policy sooner than I thought would be appropriate even a few months ago.”

Bostic also noted that Wednesday’s cut puts the Fed in a better position on policy, in that it can slow the pace of easing if inflation starts to peak up again, or accelerate it if the labor market slows further.

Market pricing anticipates a relatively even chance of the FOMC cutting by either a quarter- or half-percentage point at its November meeting, with a stronger likelihood of the larger move in December, for a total of 0.75 percentage point in further reductions by the end of the year, according to the CME Group’s FedWatch measure.

Finance

Insiders at UnitedHealth are scooping up tarnished shares

Published

1 day ago

May 16, 2025

Business Finance News

Key Points

UnitedHealth Group saw some of its insiders step in and purchase declining shares this week.
Kristen Gil, a director at the firm, bought 3,700 shares worth roughly $1 million on Thursday.
Shares of UnitedHealth plunged nearly 11% to $274.35 on Thursday following a report in The Wall Street Journal that the Department of Justice is conducting a criminal investigation into possible Medicare fraud.

Finance

Federal Reserve will reduce staff by 10% in coming years, Powell memo says

Published

1 day ago

May 16, 2025

Business Finance News

U.S. Federal Reserve in Washington, DC, on January 30, 2024.

Mandel Ngan | Afp | Getty Images

The Federal Reserve will look to reduce its headcount by 10% over the next couple of years, including offering deferred resignation to some older employees, central bank chair Jerome Powell said in a memo.

“Experience here and elsewhere shows that it is healthy for any organization to periodically take a fresh look at its staffing and resources. The Fed has done that from time to time as our work, priorities, or external environment have changed,” Powell said in a memo obtained by CNBC.

The central bank chief added that he has instructed leaders throughout the Fed “to find incremental ways to consolidate functions where appropriate, modernize some business practices, and ensure that we are right-sized and able to meet our statutory mission.” One method for shrinking the staff will be to offer a voluntary deferred resignation program to employees of the Federal Reserve Board who would be fully eligible to retire at the end of 2027.

The central bank said in its 2023 annual report that it had just under 24,000 employees. A 10% reduction would bring that number below 22,000.

The memo comes as the Trump administration has pushed for cost cuts across civil service agencies, spearheaded by Elon Musk and the so-called Department of Government Efficiency. Musk has previously called the Fed “absurdly overstaffed.” Powell’s memo did not mention Musk or DOGE as a factor in the decision to shrink headcount.

The planned staff cuts were first reported by Bloomberg News.

— CNBC’s Matt Cuddy contributed reporting.