'Fed's Kashkari says central bank may not cut rates as much if economy remains strong'

 Minneapolis Federal Reserve President Neel Kashkari on Saturday said that the central bank would probably deliver fewer interest rate cuts than expected if the U.S. economy continued to show strength.

Kashkari, who is not a voting member of the Fed's monetary policy committee, is the first central bank official to deliver public remarks after the Fed's 25 basis point rate cut on Thursday.

"One of the pleasant surprises that we've had is that productivity seems to be higher in the U.S. economy over the last few years. If that is sustained, and we're in a structurally more productive economy going forward, then that tells me we probably wouldn't end up cutting (rates) quite as far," Kashkari said in a Fox News interview.

"Productivity is notoriously difficult to forecast, so we'll have to see how the economy evolves. I've been surprised over the last year or so how resilient the economy has been. I hope that continues, and then that'll factor into our rate cut decisions," the Minneapolis Fed President added.

The Fed's 25 basis point rate cut was widely expected, following which chair Jerome Powell at the post-decision press conference said both the labor market and inflation was normalizing. 

Kashkari's remarks on Saturday about the strength of the economy echoed Fed chair Powell's at the conference. 

"It's actually remarkable how well the U.S. economy has been performing with, you know, strong growth, a strong labor market, inflation coming down. We're, you know, really performing better than any of our global peers," Powell had said. 

Kashkari also commented on the recent run up in U.S. Treasury yields in the Fox News interview. Between the September Fed meeting and Thursday's, the benchmark U.S. 10-year yield (US10Y) surged 71 basis points while the shorter-end, more rate-sensitive 2-year yield (US2Y) jumped 62 basis points. The bond sell-off was partly attributed to a reaction to Donald Trump's election victory.   

"As we've been cutting rates over the past couple of months, a lot of people have focused on the fact that long-term Treasury yields have gone up and what's causing those yields to go up," Kashkari said. "Some people have speculated it is expectations about what a new administration might do, we'll see what the new administration does or what Congress does."

"Another possible explanation is that we're just in a higher productivity, higher growth environment. And in a higher productivity, higher growth environment, all else equal, I would expect higher interest rates to go along with that," Kashkari added.   

Fed chair Powell at Thursday's press conference did not appear to be too concerned about the run up in U.S. Treasury yields. He said rising yields reflected higher expectations for growth, not inflation.  

For Wall Street, the Fed event was largely overshadowed by the culmination of the U.S. election. 

https://www.msn.com/en-us/money/markets/fed-s-kashkari-says-central-bank-may-not-cut-rates-as-much-if-economy-remains-strong/ar-AA1tNVZM