Who’s ready for a cut in interest rates?

We. All. Are.

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Whether mortgage rates, student loans, credit-card bills or auto loans, America runs on empty when it comes to the post-pandemic interest rates we are paying.

The Federal Reserve Bank of Minneapolis President and CEO Neel Kashkari expects changes ahead in 2025, even though there hasn’t been a rate cut all year.

Related: Fed official makes surprising interest rate cut prediction

Kashkari, in keeping with other economists and market watchers, is keen to see how President Donald Trump’s whipsawing tariffs and their co-joined trade wars increase inflation and/or impact the job markets.

Fed Chair Jerome Powell defended keeping the Federal Funds Rate steady in June per the Fed’s dual mandate.

Image source: Graeme Jennings-Pool/Getty Images

Fed officials send mixed reactions on 2025 rate cut forecasts

Federal Reserve Board Chair Jerome Powell defended keeping the Federal Funds Rate steady in June per the Fed’s dual mandate: prudent monetary policy regulating the money supply that keeps inflation and unemployment relatively low and GDP happily growing along.

Kashkari, in comments before the Montana Chamber Foundation on June 26, described the balancing process similar to a “seesaw.”

“That dual mandate is what we’re always trying to achieve,” Kashkari said.

Powell describes the economy as solid but that a “wait-and-see” forecast is needed until the full impact of the expected tariff prices passes through inflation and employment numbers over the next three months.

The Federal Open Meeting Committee controls the Federal Funds Rate, which banks charge each other overnight to borrow money.

The funds rate is tied to the cost of borrowing money for consumers, investors, and businesses.

The Federal Open Meeting Committee said June 18 it would keep the Federal Funds Rate at 4.25% to 4.50%.

Related: Fed’s Powell sent a blunt message on interest rates this week

Both Fed and market watchers were forecasting the next probable rate cut could appear at the September FOMC meeting.

Then Fed Governors Christopher Waller and Michelle Bowman said in separate comments earlier this week that a funds rate cut could come as early as the Fed’s July 29-30 meeting if the tariff inflation proved to be short-term and not as strong as originally expected.

Kashkari forecasts interest rate cut timings

Kashkari offered his views in a June 27 essay as to why the tariffs and the trade war have not yet shown up in the data.

“I see two likely explanations: The economic effects of the trade war are delayed, or companies are finding ways to avoid the tariffs (or some combination of both),’’ he wrote.

While inflation has continued slowly trending toward the 2 percent target and activity has held up, the labor market has also cooled gently, with the unemployment rate holding at 4.2 percent and unemployment claims not showing a rapid acceleration, Kashkari said.

“Our outreach to industry contacts suggests many businesses are reluctant to pass on price increases to customers, especially if trade deals could soon emerge and reduce overall tariff rates,’’ he added.

More Federal Reserve:

• Fed interest rate cut decision resets forecasts for the rest of this year
• Federal Reserve prepares strong message on long-term interest rates
• Fed official revamps interest-rate cut forecast for this year

While the debate of whether tariffs will lead to a one-time increase in the price level or to a more persistent increase in inflation is important, Kashkari said the Fed must try to determine if that price level increase is merely delayed or is likely to be smaller than what was announced.

“This is challenging and will take time,’’ he noted.

Kashkari, who is a member of the FOMC this year, said he is retaining his position of two .25 percent funds rate cuts this year, with the first possibly coming in September, depending on what the data showed.

“If we were to cut in September and then the effects of tariffs showed up this fall, I believe we should not be on a preset easing course,’’ he said, adding that if the data called for it, “we could hold the policy rate at the new level until we gained greater confidence that inflation was headed back to our target.”

President Trump repeated on June 27 that he wanted the Fed to cut the fund rate down to 1% when it meets in late July.

Related: Fed official suggests major interest rate change coming soon