WASHINGTON (Reuters) -The U.S. Federal Reserve may need to cut interest rates in the near term in response to a slowing U.S. economy, even though it remains unclear whether tariffs will continue to push inflation higher, Minneapolis Fed President Neel Kashkari said on Wednesday.
“The economy is slowing, and that means in the near term it may become appropriate to start adjusting,” Kashkari said in an interview on CNBC’s Squawk Box, adding that two quarter-percentage-point rate cuts by the end of the year “seems reasonable to me.”
Kashkari said concerns about rising inflation remain valid, but that it will take time to know whether that poses a problem for the Fed reaching its 2% inflation target or not.
Meanwhile a weak jobs report and downward revisions to prior months’ employment data add to a developing set of statistics that show the economy slowing to a degree the Fed cannot ignore, Kashkari said.
Recent data “suggests the real underlying economy is slowing. I’ve got confidence that that is happening,” Kashkari said. “How long can we wait until the tariff effects become clear? That’s just weighing on me right now.”
Kashkari does not have a vote on interest rate policy this year, but his arguments are similar to those voiced by two Fed governors who dissented at the Fed’s decision last week to hold the policy rate steady while awaiting more clarity on how rising import tariffs will feed through to consumer prices.
A slowdown in job creation and rise in the unemployment rate in July have begun shifting the narrative, however, to put more focus on risks to the Fed’s other goal of maintaining maximum employment.
(Reporting by Howard Schneider; Editing by Andrea Ricci)
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