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Kashkari, who runs the Federal Reserve Bank of Minneapolis, said he’s not ready to consider cutting rates until he sees “several months of real progress on inflation.” The flood of immigrants, he argued, is hindering that progress.He’s particularly freaked out by the booming demand for housing, which just won’t cool off despite sky-high rates.
“ dramatic increase in immigration were to be sustained, I think it would have a meaningful imprint on the economy,’ Kashkari told the“Housing is traditionally the most interest-rate sensitive sector of the economy. And it has shown remarkable resilience and even some evidence that new leases are ticking back up,” Kashkari said. “That’s also particularly concerning because when we do the math, it takes a year or more for new leases to translate into the actual measured inflation number.
Since July 2023, the Fed has held interest rates at 5.25 percent to 5.5 percent. At the start of the year, Fed officials and financial markets expected the Fed to cut several times this year. “I think the balance of risks suggests it will likely be down but we shouldn’t rule anything out at this point. I think a more likely scenario is that we sit where we are for an extended period of time,” he said.
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