Meanwhile, the stock market is booming, a sign of confidence in the direction of the economy. But the stock market is not indicative of the economy of the whole, Kashkari pointed out, as growth has come largely from less labor-intensive industries, like data centers.
“Technology is driving rapid growth of industries that don’t require as much labor, resulting in a booming stock market and sluggish hiring environment,” he wrote.
The Fed’s benchmark interest rate affects credit cards, car loans and other lines of credit, and is one of several factors that influence mortgage rates. Kashkari wrote the housing market “might not actually experience much relief from rate cuts.”
“A second risk to long-run inflation expectations is one of some political development that damages Fed independence and reduces confidence that the [Federal Open Market Committee] will set rates appropriately,” he wrote. “While a serious potential issue, managing it is outside of the control of the FOMC.”