Fed's Kashkari: If inflation unexpectedly rises before December, it could give the Fed pause on rate cuts
Fed Kashkari says it could take one to two years for inflation to fall to 2 percent, given the dynamics of the housing market; doesn't want to declare victory on inflation, but there are good reasons to be confident. A strong labor market is "encouraging" and the economy looks strong. If inflation picks up unexpectedly before December, that could give the Fed pause in cutting rates. In a higher productivity environment, a higher neutral rate means less room for the Fed to cut rates. The threshold for the Fed to stop shrinking its balance sheet is still 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 U.S. economy.