President of the Federal Reserve Bank of Minneapolis Neel Kashkari has softened its stance about the possibility of interest rate cuts in September. In a recent conversation with The Wall Street Journal, Kashkari said that it is “appropriate” to debate about rate cuts during the Fed’s meeting next month.
Kashkari previously stated in June that the rate cuts might not be necessary until later in 2024. However, recent data showing a weakening labor market caused him to change his mind. The unemployment rate in the United States came at 4.3% in July, prompting fears that the country’s economy is slowing down.
“The balance of risks has shifted, so the debate about potentially cutting rates in September is an appropriate one to have,” Kashkari told The Wall Street Journal.
Speaking further on the subject, Kashkari said that if it wasn’t for the concerning unemployment report, he would still believe that there was no need for cuts in September. He also added that the interest rates should be lowered by a quarter percentage point as there are no signs of rapid “deterioration” in the labor market that would call for bigger rate cuts.
“If we saw some quicker deterioration in the labor market, then that would tell me, ‘Well, we need to do more, quickly, to support the labor market, even if we have uncertainty about where our ultimate destination is going to be,” Kashkari told WSJ.