Minneapolis Federal Reserve President Neel Kashkari expressed his openness to postponing another interest rate hike in the coming month but advised against interpreting it as a definitive pause. During an interview on CNBC’s “Squawk Box,” the central bank official stated that the decision is currently balanced between raising rates in June or abstaining. He emphasized the importance of not signaling the end of the tightening cycle and explained that a decision to skip a rate hike in June would simply indicate a need for more information.

According to the CME Group’s FedWatch tracker of futures prices, the market currently assigns an approximately 83% probability that the Federal Open Market Committee (FOMC) will hold off on the 11th consecutive rate increase at its upcoming meeting on June 13-14. Neel Kashkari is a voting member of the FOMC this year. Traders anticipate that the Fed may potentially lower rates by about half a percentage point by the end of the year, reflecting expectations of decreasing inflation and a slower economy.

Despite market projections, central bank officials have consistently stated that they do not anticipate rate cuts this year. Kashkari mentioned that if inflation does not decrease, he would advocate for further rate hikes. He emphasized the importance of not ruling out future rate increases and stated that it is crucial to recognize that rates falling is not the Fed’s primary objective.

Fed Chair Jerome Powell recently suggested that the recent strains in the banking system could potentially slow down the economy enough to warrant a less aggressive approach from policymakers. Kashkari acknowledged this possibility but noted that there have been few indications of a significant macroeconomic impact resulting from the recent banking issues.

Kashkari acknowledged the uncertainty surrounding the current understanding of inflation dynamics, describing it as the most uncertain time in that regard. He emphasized that they are allowing inflation to guide their decisions. Depending on the impact of banking stress on inflation, he stated that the fed funds rate might need to surpass 6%, but he admitted uncertainty about the current situation.

The current target range for the Fed’s benchmark funds rate is 5% to 5.25%. In addition to the rate decision, the June meeting will include updates on the central bank’s forecasts for inflation, GDP, and unemployment, as well as the release of the governors’ future rate expectations, known as the “dot plot.”