Fed Official Kashkari Backs Two Rate Cuts in 2025; Rate Cut Odds Hit 93%

There are growing concerns at the Fed over an economic slowdown, and calls for rate cuts are getting louder. Now, a key fed official has joined the chorus ahead of the critical September meeting.

The latest to back a September rate cut is Federal Reserve Bank of Minneapolis President Neel Kashkari.

Kashkari Signals Support for Rate Cuts as Economy Slows

In a recent interview with CNBC, Kashkari said the Fed may need to cut interest rates soon as signs of a slowing economy grow stronger.

While the full impact of new tariffs remains unclear, he believes it’s time to act on existing data showing weaker growth. He has pointed to softening job data and overall slowdown, and said that the Fed can’t afford to wait too long for tariff clarity. Kashkari previously hinted in June that a September cut was possible.

Rate Cut Odds Climb 93%

The odds of a rate cut in September have climbed over 93% as per the CME FedWatch Tool. Kashkari says two rate cuts this year still seem like a reasonable path. But if new tariffs start driving inflation up more than expected, then the Fed might need to hit pause or even raise rates again.

Fed President Mary Daly Says Waiting Too Long Could Be Risky

Just recently, San Francisco Fed President Mary Daly said that the time for interest rate cuts is approaching and there may even be a need for more than two cuts this year. Daly said there’s no clear sign yet that tariffs are driving inflation higher. But she warned that waiting too long could be risky. 

The Fed held interest rates steady at 4.25-4.50% at the last meeting. But two top officials, Christopher Waller and Michelle Bowman, disagreed. This shows that support for rate cuts is growing even inside the Fed.

President Trump also continues to push for a Fed rate cut and has even called for a drastic 300-basis-point cut, although such a move is widely seen as unlikely. To support his stance, he plans to appoint a pro-rate-cut candidate to replace outgoing Fed Governor Adriana Kugler.

Trump Narrows Fed Chair Shortlist

Trump is also narrowing his list of candidates to succeed Jerome Powell as Fed Chair in 2026. The shortlist includes Kevin Hassett, Kevin Warsh, and two unnamed contenders. Treasury Secretary Scott Bessent has been ruled out as he prefers to stay in his current role. Fed Governor Christopher Waller is also seen as a potential contender for the role.

The decision could have a lasting impact on U.S. monetary policy. While Trump has criticized Powell for keeping rates high, he says replacing him early remains “highly unlikely.” With Kugler stepping down, Trump will now get to name another Republican on the Fed board, potentially someone who could later become the Fed chair.