Fed’s Kashkari: Current policy close to neutral or slightly accommodative

• Fed's Kashkari says current policy close to neutral or slightly accommodative.
• Fed' Kashkari says seems like the battles with China on trade are not getting worse.

Reuters reports that the Federal Reserve's monetary policy is delivering no more than a small boost to the economy, Minneapolis Federal Reserve Bank President Neel Kashkari said Tuesday.

After cutting interest rates three times last year, the Fed now targets short-term borrowing costs at between 1.5% and 1.75%. That puts policy "close to neutral or slightly accommodative today, but not very accommodative," Kashkari said at a Town Hall streamed live from Kalispell, Mont. Kashkari had called for deeper and faster rate cuts to cushion the economy from the effects of trade policy uncertainty and slowing growth than the Fed actually delivered.

Key notes

• Fed's Kashkari says current policy close to neutral or slightly accommodative.
• Fed's Kashkari says not clear that climate is changing fast enough it should affect Fed rate setting.
• Fed's Kashkari says interest rates are slightly accommodative, not providing much boost.
• Fed' Kashkari says seems like the battles with China on trade are not getting worse.

Market implications

While the trade relations between the US and China have plated into what appears to be a feasible solution, it is still very early days. Indeed, we are yet to see what the response will be by US President Donald Trump with respect to the Chinese requests to be lenient with regards to the black swan even in the coronavirus. 

The coronavirus remains a wild card and was a focal point of Fed Chair Jerome Powell’s testimony Tuesday on Capitol Hill – more on that here: Powell speech: Too early to determine effect of coronavirus on US

Today, however, China’s National Health Commission said the number of new, confirmed cases fell to 2,478 from 3,062 a day earlier, bringing the total to 42,638 on the mainland, including some of whom have since recovered and been released from treatment. This is signifying that the Chinese are making progress in combatting and containing the virus – US benchmarks printing all-time highs and gold and the yen back under pressure. A cautious but upbeat assessment by Fed Chair Powell also supported markets.