Kashkari urges Fed rate rise

Neel Kashkari said on August 5 that the Federal Reserve should “start slowly moving up” interest rates, reopening the prospect of a rate increase as soon as September after the central bank held steady last week. Lisa Cook, a Fed governor, said the same day that she was “prepared to act” with a hike unless inflation data improved. Those comments came after the Federal Open Market Committee voted 9-3 on July 29 to keep the benchmark federal funds rate at 3.5% to 3.75%. Markets, meanwhile, were still weighing weaker labor data against a firmer tone from policymakers. ### Why did Kashkari’s comments matter more than a routine Fed speech? Minneapolis Fed President Neel Kashkari told CNBC on August 5 that “now is the time to start slowly moving” rates higher. Kashkari was one of three officials who dissented at the July 29 meeting in favor of a quarter-point increase, according to the Fed’s statement and subsequent reporting. (cnbc.com) The July 29 vote was notable because the committee did not present a united front around holding policy steady. The Fed said it maintained the target range at 3-1/2 to 3-3/4 percent by a 9-3 vote, with three members favoring a hike, a split that gave added weight to Kashkari’s call for action. ### What exactly did Lisa Cook say? (cnbc.com) Federal Reserve Governor Lisa Cook said on August 5 that she was “prepared to act” on a rate increase unless inflation numbers improved. CNBC reported that Cook had voted with the majority to hold rates steady a week earlier, but said that stance might not be sustainable without clearer evidence that price pressures were easing. (federalreserve.gov) Lisa Cook’s intervention mattered because governors vote at every FOMC meeting, unlike regional bank presidents who rotate in and out of voting seats. Her remarks also followed a period of political scrutiny over her position at the Fed, after the Supreme Court ruled in June that she could remain in office while litigation over President Donald Trump’s attempt to remove her continued. (cnbc.com) ### What changed after the July hold? The Federal Reserve said on July 29 that economic activity was expanding at a solid pace even as it left rates unchanged. The official statement kept the target range at 3.5% to 3.75%, and the Fed’s implementation note said the interest rate paid on reserve balances would remain 3.65% effective July 30. (cnbc.com) J.P. Morgan Wealth Management said in a note published August 5 that the July decision had “lowered the bar” for a September quarter-point hike. The firm said its strategists had shifted from expecting no further moves in 2026 to expecting a 0.25-percentage-point increase, citing elevated energy costs tied to Iran-related supply shocks and investor doubts about the Fed’s inflation-fighting resolve after the July hold. (federalreserve.gov) ### Why weren’t markets fully convinced? ADP payrolls data released August 5 came in weaker than expected, and CNBC reported that Treasury yields edged lower as traders weighed softer labor signals against Kashkari’s hawkish remarks. The 10-year Treasury yield was down more than 1 basis point at 4.613%, while the 30-year bond yield fell 2 basis points to 5.169%, according to CNBC’s market report. (chase.com) That left investors balancing two competing signals. Fed officials were openly discussing the case for another increase, while market pricing still reflected the possibility that weaker growth or labor data could eventually revive expectations for easing later in the year, according to CNBC and J.P. Morgan Wealth Management. ### What is the next date to watch? (cnbc.com) The Federal Reserve’s next policy decision will come at its September meeting, after the July 29 hold and the split 9-3 vote that exposed support for an immediate increase. Kashkari said a move could come as soon as September, and Cook said she was ready to support one if inflation did not improve before then. (cnbc.com 1) (cnbc.com 2)