Kashkari supports the 50 basis point cut, sees another 50 bps by year's end

Markets are gearing up for a week filled with Fed commentary, as central bank members are set to provide extensive forward guidance following last week's 50 basis point rate cut. Investors will be closely analyzing every statement for hints about the Fed's next moves, with a particular focus on which economic data points will be prioritized as key indicators. Minnesota Fed President Neel Kashkari was the first to speak, and we'll dive into his remarks before outlining where the market views each Fed member on the hawk-to-dove spectrum.

Minneapolis Fed President Neel Kashkari stated that his rate projection for September was in line with the median Fed submission, which saw a 50 basis point rate cut last week and anticipates another 50 basis point reduction through 2024. He emphasized that the recent 50 basis point rate cut was the right decision, reflecting progress on inflation and a softening labor market. Kashkari also forecasted the Fed policy rate to end 2024 at 4.4% and 2025 at 3.4%, consistent with the median of other Fed policymakers.

Kashkari cautioned that it's still too early to declare victory over inflation, although the disinflationary process appears to be on track. He noted that the Fed's future rate path will depend on the totality of incoming data, acknowledging that while policy remains tight, it's unclear exactly how tight it is. Kashkari also highlighted the mixed signals in the economy, with GDP and consumer spending showing resilience, but he sees little evidence of recessionary forces building or inflation unexpectedly surging.

Kashkari has been viewed as one of the most hawkish Fed members, so his commentary will be well received on the street. Of note, Kashkari is a voter in the final twoi meetings of 2024.

Here's a review of the Federal Reserve members listed in the FOMC Hawk/Dove Analysis as of August 7, 2024, noting their positions on the hawk-dove scale and their voting status in 2024 and 2025. This will be important as it provides some context for investors. meaning, a hawk talking "hawkish" does not carry as much weight as a dove speaking hawkish, etc. :

Most Dovish Members:

1. Kugler (Board): Kugler is among the most dovish members of the FOMC, suggesting a strong preference for more accommodative monetary policies. Kugler is a voter in both 2024 and 2025.

2. Barr (Board): Similar to Kugler, Barr is also on the dovish end of the spectrum, advocating for policies that typically favor lower interest rates to support economic growth. Barr will vote in 2024 and 2025.

3. Goolsbee (Chicago): The President of the Chicago Fed, Goolsbee, is another dovish member who will vote in 2024 but will not have a voting role in 2025. His stance generally aligns with supporting economic expansion and employment.

4. Cook (Board): Like Kugler and Barr, Cook is a Board member with a dovish stance, favoring lower rates to stimulate the economy. Cook is a voter in both 2024 and 2025.

Moderately Dovish to Neutral:

5. Harker (Philadelphia): Harker is more neutral, leaning slightly dovish. He is not a voter in 2024 but will vote in 2025.

6. Jefferson (Vice Chairman): Jefferson holds a relatively neutral stance, slightly leaning dovish. He will vote in both 2024 and 2025.

7. Hammack (Cleveland): As the Cleveland Fed President, Hammack is slightly dovish and will vote in 2024 but not in 2025.

8. Williams (New York): Williams, as the New York Fed President, traditionally holds a central and influential position. He leans slightly dovish and will be a voter in 2024 and 2025.

Neutral:

9. Collins (Boston): Collins is relatively neutral, balancing between dovish and hawkish stances. She will vote in 2024 but not in 2025.

10. Powell (Chairman): As the Fed Chairman, Powell's stance is central, often balancing between hawkish and dovish perspectives depending on economic conditions. Powell will vote in both 2024 and 2025.

Moderately Hawkish:

11. Daly (San Francisco): Daly leans moderately hawkish, advocating for more caution regarding inflation. Daly will not vote in 2024 but will vote in 2025.

12. Musalem (St Louis): The St. Louis Fed President, Musalem, is slightly hawkish and will vote in 2024 but not in 2025.

13. Barkin (Richmond): Barkin holds a moderate hawkish stance and will vote in 2024 but not in 2025.

14. Logan (Dallas): Logan is also moderately hawkish and will not vote in 2024 but will vote in 2025.

15. Waller (Board): As a Board member, Waller leans hawkish and will vote in both 2024 and 2025.

16. Kashkari (Minneapolis): Kashkari, who has shifted to a more hawkish stance over time, is a voter in 2024 and 2025.

Most Hawkish:

17. Bostic (Atlanta): Bostic, a hawkish member, favors tighter monetary policies to combat inflation. He will vote in 2024 and 2025.

18. Schmid (Kansas City): Schmid, representing the Kansas City Fed, is one of the most hawkish members and will vote in 2024 but not in 2025.

19. Bowman (Board): Bowman is the most hawkish member on this list, advocating for strong measures to control inflation. Bowman will vote in both 2024 and 2025.

These members will play critical roles in shaping U.S. monetary policy over the next two years, with a mix of dovish and hawkish perspectives influencing decisions on interest rates and economic strategy.