Key Takeaways
- Federal Reserve’s Neel Kashkari highlighted uncertainty about the number of rate cuts needed to reach a neutral policy rate.
- Recent and expected rate cuts in 2025 coincide with a Fed shift toward an easing cycle, but the ‘neutral rate’ is higher than pre-pandemic levels.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, expressed uncertainty today about how many additional rate cuts would be needed to reach a neutral policy stance.
Kashkari and other Fed officials now estimate the neutral rate could be around 3.1%, higher than pre-pandemic levels of 2-3%. The elevated estimate suggests fewer cuts might be necessary to reach the theoretical rate where monetary policy neither stimulates nor restrains economic growth.
The uncertainty about the neutral rate echoes debates from the 2010s when rates were held low for extended periods to aid recovery, contrasting with the Fed’s aggressive cuts to near-zero during the COVID-19 era in 2020.
Source: https://cryptobriefing.com/kashkari-federal-reserve-rate-cut-neutrality-2025/