It’s reasonable to consider rate cut next month, says Fed’s Neel Kashkari

Federal Reserve Bank of Minneapolis President Neel Kashkari said it is still appropriate to consider another interest-rate cut at the central bank’s December meeting.

“It’s still a reasonable consideration,” Kashkari said Monday on Bloomberg Television in response to a question about whether policymakers should reduce borrowing costs by a quarter point at their last meeting of the year. “Right now, knowing what I know today, still considering a 25-basis-point cut in December — it’s a reasonable debate for us to have.”

Kashkari said the economy’s resilience in the face of higher interest rates suggests that the neutral rate, where policy neither weighs on nor stimulates growth, may be higher now. That raises questions about how much monetary policy is helping to cool demand in the economy, he said. The longer that resiliency continues, the more he thinks that shift might be structural and not merely temporary.

“This is what I’m trying to understand right now, is how much downward pressure are we putting on the economy, and what is the path for inflation,” Kashkari said.