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Fed Official Kashkari Backs Two Rate Cuts in 2025; Rate Cut Odds Hit 93%
The probability of a rate cut in September has surged to an astonishing 93%, as Minneapolis Fed President Neel Kashkari explicitly endorsed two rate cuts this year, citing slowing economic data. This development is a significant blow to the Federal Reserve’s current monetary policy stance.
Kashkari, who will be voting on interest rates next year, emphasized that if new tariffs start driving inflation up more than expected, then the Fed might need to pause or even raise rates again. However, he believes it would be reasonable to cut rates twice in 2025 given the weakening jobs data and softening economic growth.
This stance echoes previous warnings from San Francisco Fed President Mary Daly, who cautioned that waiting too long could be risky for the US economy. Kashkari’s comments have further fueled the market expectations of a September rate cut, with odds now firmly entrenched at an unprecedented 93%.
In recent times, Kashkari had hinted in June that a September cut was possible; however, this explicit support will likely amplify the debate around monetary policy. Notably, even internal Fed dissent has emerged, as two officials – Christopher Waller and Michelle Bowman – publicly disagreed with the central bank’s decision to hold interest rates steady at 4.25-4.50% at the last meeting.
The growing chorus of support for rate cuts is also reinforced by President Trump’s desire for a drastic 300-basis-point cut, although such an extreme measure is seen as unlikely. Trump plans to appoint a pro-rate-cut candidate to replace outgoing Fed Governor Adriana Kugler and has narrowed his list of candidates to succeed Jerome Powell as Fed Chair in 2026.
Kashkari’s statement further solidifies the notion that rate cuts could be more frequent than previously anticipated, potentially putting downward pressure on interest rates.
Source: coinpedia.org
