(Bloomberg) -- Minneapolis Federal Reserve President Neel Kashkari said it appears likely that “further modest reductions” in the central bank’s benchmark interest rate will be appropriate in coming quarters.
“Ultimately, the path ahead for policy will be driven by the actual economic, inflation and labor market data,” Kashkari said Monday in Buenos Aires at a conference held by the Central Bank of Argentina.
A measure of underlying inflation in September came in hotter than expected, while the most recent snapshot of the US labor market showed a drop in unemployment amid solid hiring. Such data have caused investors to pull back bets the Fed will again cut its benchmark interest rate by another half percentage point at its upcoming meeting in November, as policymakers did in September.
While Kashkari described the Fed’s current policy stance as restrictive, he said the extent to which it’s restrictive is “unclear.”
Kashkari said the labor market remains strong and the most recent jobs report provided encouragement that “a rapid labor weakening does not appear to be imminent.” He added that inflation had “come down dramatically from its peak but remains somewhat above our target.”
Kashkari said previously that he was comfortable with the Fed’s September cut and that a quarter-point reduction at each of the Fed’s two remaining meetings this year is a “reasonable starting point.” That’s in line with the median estimate from Fed policymakers released last month.
Later Monday, during a Q&A session at Torcuato di Tella University, Kashkari said he thought China could “muddle through” the fallout from its housing bubble, but that its government was holding back its economy in the long run.
“Structurally, I think their economy is not remotely competitive with advanced economies,” Kashkari said. “On the one hand, China says that they want to be an innovation economy and compete with the best around the world. On the other hand, they’re literally clamping down in their innovation sectors for their political ends.”
Kashkari said he wasn’t worried about China as a competitor to the US because “they’re shooting themselves in the foot” by interfering in AI and other innovative sectors.
(Updates with comments on China, from seventh paragraph.)
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