Kashkari says September rate hike shows Fed resolve on inflation
His comments come as traders split on whether the Fed will raise rates again in October.
Published
Federal Reserve President Neel Kashkari said the Fed's September rate increase shows the central bank will act to bring inflation down. He said markets expect Chairman Warsh to keep cooling price growth, that inflation expectations remain centered near 2%, and that he sees no sign of systemic risk in the financial system.
The remarks land well after the September hike itself and arrive as officials disagree over what comes next. Traders have cut the odds of an October rate increase to 50-50 from 70% after New York Fed President John Williams signaled no urgency to act. Fed Vice Chair Philip Jefferson has said policymakers may need more time before deciding their next move, a position that has kept the timing debate open even as hawkish officials press for another hike.
The case for anchored inflation expectations has firmer footing than it did two months ago. A revised Core PCE Price Index for the second quarter came in at 0.3%, far below both the original 3.3% reading and the 3.6% forecast, pulling rate expectations back toward a Fed that holds off in October. US payrolls grew by 90,000 in September, topping August's 75,000 gain and well above the 38,000 forecast, adding to the uncertainty over which way the data ultimately points.
Kashkari's assurance that he sees no systemic risk does not resolve that timing question, and it leaves long-dated Treasurys exposed to whichever report, payrolls or PCE, tips the balance. The 30-year fixed mortgage rate has already climbed to 7.3%, its highest level since November 2023, and mortgage applications fell 6.0% in the week ended September 25, a steeper drop than the previous week's 1.5% decline.