"The higher the policy gets, the more we squeeze data and analysis," says Kashkari, whose calls for lower interest began before Trump took office.
Between the lines: The Fed's stance on monetary policy has come full circle: About a year ago, it raised interest rates. In July, the first cut in interest rates since the financial crisis in an attempt to keep record economic expansion going as risk – namely Trump's trade war – threatens economic growth.
- Businesses have cut back on spending in the face of uncertainty, and the pace of hiring has slowed.
- "If everyone gets talked, it's enough to maybe tip the economy over."
Whether or not the Fed's actions to lower rates could provide coverage for Trump to ramp up the trade war – a topic of a highly controversial call by former New York Fed President Bill Dudley. Kashkari says inflation that falls below the 2% target is also an important factor for the Fed's move.
Let's say, if we had inflation well above target and we were worried that inflation expectations were climbing, I think, then we would be much more reluctant to say: & # 39; Well, we're going to try to cut interest rates. trade war. & # 39; … If you put aside what the cause is, just look at this data – this data means you want a more accommodating monetary policy.
– Minneapolis Fed President Neel Kashkari
The Big Picture: The Fed hears from community leaders and activists in a series of unprecedented "listening sessions" across the country. The events, as chairman Jerome Powell has pointed out many times, have convinced the Fed of the importance of keeping recovery going for communities that are still recovering from the financial crisis.
- "The conventional wisdom was that monetary policy does not have a role to play in distribution results … We have now learned that monetary policy has the biggest role to play because we need to create context for all these different groups to participate in the economy , "Kashkari tells Axios.
What's next: Although he does not want a vote at the Fed meeting this month, Kashkari would vote for what may be the majority.
- I would probably vote for to reduce interest rates in October, "he says to Axios." But I don't know how far we have to go – it really depends on how the data comes out. "