On Monday local time (October 21), Neel Kashkari of the Minneapolis Fed stated that he currently leans towards a slower pace of future rate cuts over the next few quarters, but if the job market deteriorates significantly, he may advocate for accelerating the pace of rate cuts.

Last month, the Fed announced a 50 basis point rate cut, lowering the federal funds target range to 4.75%-5.00%, initiating the much-anticipated rate-cutting cycle. Market currently generally expects the Fed to cut rates by 25 basis points at the November rate meeting.

Kashkari expressed his support for the decision makers' 50 basis point rate cut last month at an event in Wisconsin on Monday, but expects the rate cuts at future meetings to be smaller. The Fed's monetary policy action last month surprised many, with some critics believing that the decision makers should not have cut rates by 50 basis points, but should have opted for a smaller cut.

"I currently expect some more moderate rate cuts over the next few quarters to approach the neutral interest rate level, but this will depend on the data," Kashkari said. The so-called neutral interest rate refers to a rate level that neither stimulates nor restrains the economy.

Kashkari believes that the current interest rate levels are still acting as a brake on the economy, but he also remarked that the strong performance of the U.S. economy during the Fed's rate hikes and since the rate cut last month suggests that the current neutral interest rate may be higher than in the past.

Kashkari reiterated the Fed's dual goals of maintaining a strong labor market while bringing inflation down to the 2% target level.

Regarding faster rate cuts, Kashkari said, "If we see clear evidence of a rapid weakening in the labor market, as a policy maker, that would tell me, 'Maybe we should lower interest rates faster than I currently expect'."

Editor/Rocky