Kashkari: Interest Rates May Have Reached "Neutral" Level; Future Depends on the Balance Between Inflation and Employment
Federal Reserve Kashkari said Monday that the U.S. benchmark interest rate may be close to its “neutral level,” and that future monetary policy will depend on the direction of economic data.Kashkari noted that although markets have anticipated an economic slowdown over the past two years, the U.S. economy has demonstrated far greater resilience than expected. He believes this indicates that the current monetary policy is not as restrictive on the economy as previously thought, and that interest rates may already be in a neutral zone that neither stimulates nor restrains economic growth.He emphasized that Federal Reserve currently faces dual risks: on the one hand, potential long-term inflationary pressures from tariff policies, the full impact of which may take years to materialize; on the other hand, the risk of a sudden rise in unemployment. He stated that Federal Reserve needs more data to determine whether inflation or the labor market is the more significant driving force, and to decide the future direction of policy accordingly.
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