Neel Kashkari of ’08 Great Financial Crisis fame (Paulson’s assistant at Treasury), is out in the NYT throwing shade on the consensus Fed rate expectations.
Currently, September futures imply a peak Fed funds rate in the 3s early next year and then cuts later in the year. Kashkari had something else to say about that:
“I don’t know what the bond market is looking at in reaching that conclusion,” Mr. Kashkari said, adding that the bar would be “very, very high” to lower rates.
He went further to reaffirm the commitment to blunt inflation:
“The committee is united in our determination to get inflation back down to 2 percent, and I think we’re going to continue to do what we need to do until we are convinced that inflation is well on its way back down to 2 percent — and we are a long way away from that.”
That said, while it is fun to follow the Fed drama, the back and forth has direct implications on what is likely to be a muted investment environment given uncertainty breeds caution.