Minneapolis Fed President Neel Kashkari said he had advocated for such a move at this week’s meeting, which ended with the central bank leaving rates unchanged.
Other policy makers speaking on Friday didn’t go nearly as far as Kashkari, considered one of the Fed’s more dovish officials. But their comments reinforced expectations that the Fed is on course to reduce rates, perhaps as soon as next month.
President Donald Trump, who has sharply criticized Fed Chairman Jerome Powell for keeping credit too tight, said Thursday that he expects the central bank to lower rates. “Can’t win it all. Eventually he’ll do what’s right,” the president said of Powell.
Powell deputy Richard Clarida said on Friday that the argument for easier policy has strengthened recently as the economic outlook has turned more uncertain.
“The case for providing accommodation has increased,” Fed Vice Chair Clarida said in a Bloomberg Television interview. “There’s been a marking down in global growth prospects. There’s been uncertainty about international trade.”
Governor Lael Brainard also sounded open to a rate cut even though she called the economic outlook solid.
Recent weeks “have seen important downside risks,” she said at a Fed event in Cincinnati, adding that the central bank must take those into account in setting policy.
The Federal Open Market Committee’s vote on Wednesday to leave rates unchanged — in a 2.25% to 2.5% range — was not unanimous, with St. Louis Fed President James Bullard seeking a quarter-point rate cut.
His vote marked the first dissent of Powell’s 16-month tenure as chairman. (Kashkari is not a voting member of the FOMC this year, although he will be in 2020).
In a blog posting on Friday explaining his dissent, Bullard said he favored a cut to guard against downside risks of too-low inflation and weaker growth.
“Even if a sharper-than-expected slowdown does not materialize, a rate cut would help promote a more rapid return of inflation and inflation expectations to target,” he said.
The Fed has failed to convincingly hit its 2% inflation objective since 2012. What’s more, inflation expectations, particularly in financial markets, have fallen recently and Fed officials themselves have marked down their forecast of price rises this year, to 1.5%, from 1.8% in March.
Kashkari zeroed in on tepid inflation and inflation expectations in his call for easier monetary policy at this week’s FOMC meeting.
“I advocated for a 50-basis-point rate cut to 1.75% to 2% and a commitment not to raise rates again until core inflation reaches our 2% target on a sustained basis,” Kashkari wrote in an essay released Friday. “I believe an aggressive policy action such as this is required to re-anchor inflation expectations at our target.”