8/21, 1:24 PM (Source: TeleTrader)
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Kashkari: Fed should add guidance to rate cut

One of the most dovish central bankers in the United States suggested for the Federal Reserve to make it clear "at a minimum" that interest rates wouldn't be raised until core inflation gets back up to the 2% objective on a sustainable basis. Neel Kashkari wrote in an op-ed piece, published on Wednesday in the Financial Times, that the communication tool known as forward guidance should accompany another cut in borrowing costs in September.

The president of the Minneapolis Fed said assuring market participants and consumers would underpin the economy stronger than a conventional easing move alone. He pointed to the slowdown in the economy on a global scale, highlighted the weakness in domestic corporate spending and warned that the key section of the yield curve on Treasury debt securities has inverted briefly last week.

Next year's voting member of the Federal Open Market Committee said turning to forward guidance only after rates are effectively at zero would be like someone "driving a car into a ditch" and claiming they are keeping it there on purpose. In his view, policymakers must use the opportunity to influence the situation in the long term before it is too late.

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