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Fed Doubts Grow Over December Rate Cut With Kashkari on Fence

(Bloomberg) -- Federal Reserve Bank of Minneapolis President Neel Kashkari said he didn’t support the US central bank’s last interest-rate cut, though he’s still undecided on the best course of action for its December policy meeting.

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“The anecdotal evidence and the data we got just implied to me underlying resilience in economic activity, more than I had expected,” Kashkari said Thursday in an interview with Bloomberg News. That, he said, argued for a pause to rate cuts at the Fed’s October meeting.

Since then, available data have suggested “more of the same” for the economy, Kashkari said. For the upcoming Dec. 9-10 rate decision, “I can make a case depending on how the data goes to cut, I can make a case to hold, and we’ll have to see.”

With his remarks, Kashkari joins a slew of Fed officials who have in recent days expressed skepticism over the need for another cut in December, or outright opposed one. It remains unclear whether they can persuade enough voting members of the Federal Open Market Committee, given a number of policymakers are still more worried about weakness in the labor market.

The Minneapolis Fed chief doesn’t hold a vote on rate decisions this year but participates in FOMC deliberations.

Financial markets have taken note of the volume of comments coming recently from the Fed’s so-called inflation hawks. Investors have marked down the odds of a rate cut in December to about 50%, based on federal funds futures contracts. Before the Fed’s October meeting, those odds were around 100%.

Divided Data

After the September decision, when the central bank cut rates for the first time this year, Kashkari said he was anticipating two more reductions in 2025. He said Thursday he believed the economy was slowing more meaningfully at the time.

“There are a lot of headlines about low-income borrowers — sub-prime borrowers, sub-prime companies that serve sub-prime markets — getting into trouble, so it seems like there’s real pockets of weakness in the labor market,” he said. “At the same time, a lot of corporate earnings are doing fine, and a lot of corporations are very optimistic about 2026.”

Kashkari is not alone in wanting to see more data before making a decision about the Fed’s last meeting of the year. Mary Daly, president of the San Francisco Fed, earlier Thursday also expressed uncertainty about what to do at the gathering.

“It’s premature to say definitely ‘no cut,’ or ‘definitely a cut,’” Daly said at an event in Dublin, adding that the direction of change in policy appeared “neutral.”

But others have staked out a preference for the last meeting of the year, and a growing number of officials are advocating for holding rates steady.

Hawkish Wing

Susan Collins, who heads the Boston Fed, said Wednesday rates should stay at their current level for “some time” to strike a balance between inflation, which at 3% is still above the Fed’s 2% target, and weaker hiring in the labor market. She said still-strong growth could slow or stall progress on cooling price pressures.

Other officials that had in the past been more enthusiastic about cutting rates, including the Chicago Fed’s Austan Goolsbee, have expressed similar sentiments in recent weeks. They’re joining the Fed’s more hawkish wing, which includes policymakers like the Kansas City Fed’s Jeff Schmid, Beth Hammack of the Cleveland Fed and the Dallas Fed’s Lorie Logan, all of whom have warned against cutting rates again.

Meanwhile, Governors Stephen Miran, Christopher Waller and Michelle Bowman have argued for cuts. Miran, the newest Fed official — appointed by President Donald Trump earlier this year — said inflation has come in better than expected, supporting the case for lower rates.

Fed officials will get a fresh glimpse into the state of the US economy once government agencies resume publishing official statistics now that the shutdown has ended. It’s unclear, however, how much new data will be available in time for the Fed’s December gathering.

(Updates throughout with additional background and comments from Fed officials.)