Fed's Kashkari: Surprise rise in inflation by December could give Fed pause on rate cuts
Fed's Kashkari said that given the dynamics of the housing market, it could take one to two years for inflation to fall to 2%; did not want to declare victory on inflation, but there is good reason to remain confident. The strong labour market is ‘encouraging’ and the economy looks strong. If inflation rises unexpectedly before December, this could give the Fed a pause in cutting rates. Higher neutral rates in a higher productivity environment means less room for the Fed to cut rates. The bar for the Fed to stop tapering remains quite high and there is still a long way to go before it ends. The extent to which the Fed cuts rates will depend on the performance of the US economy.
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