The BareStory
Minneapolis Federal Reserve President Neel Kashkari stated on Monday that the central bank is nearing the point where it should stop lowering interest rates, suggesting that monetary policy is close to a neutral level. This assessment follows three consecutive rate cuts in late 2025, which lowered the federal funds rate to a target range of 3.5% to 3.75%. Kashkari noted that current projections place the rate approximately half a percentage point away from the consensus on a neutral stance.
Kashkari, who serves as a voting member of the rate-setting committee in 2026, expressed concern that inflation remains too high, citing a recent core inflation measure of 2.8%. He observed that the economy has shown unexpected resilience, suggesting that policy is not exerting significant downward pressure. While the unemployment rate has risen to 4.6%, Kashkari indicated the committee must weigh the risks of a slowing labor market against persistent inflation, which he noted could be influenced by tariffs from President Donald Trump. He added that the accuracy of recent inflation data has been questioned due to a government shutdown.
Regarding the labor market, Kashkari attributed a slowdown in hiring at large companies to the adoption of artificial intelligence. He reported that businesses are seeing "real productivity gains" and returns on their AI investments, leading to a landscape of low hiring and low firing among bigger firms. While acknowledging some instances of poor investment, he stated that companies have moved from skepticism to active use of the technology over the past two years.
Separately, Kashkari commented on Federal Reserve leadership, stating he would support Jerome Powell remaining as a governor after his term as chair expires in May. President Trump has indicated he plans to name Powell's successor in January.
How it may affect me
As a U.S. reader:
Borrowing costs for loans and mortgages may stabilize rather than fall further, as the Federal Reserve indicates it is nearing a neutral stance and may stop lowering interest rates soon.
Applicants for jobs at large companies may face reduced hiring opportunities, as firms leverage artificial intelligence for productivity gains instead of recruiting new employees.
You may see prices remain high or rise further, as officials cite persistent core inflation and potential tariffs as ongoing risks to economic stability.
Policy decisions affecting the broader economy could become volatile, as rate-setters must weigh rising unemployment against inflation data obscured by government shutdown disruptions.
