USD weakens as Fed's Kashkari signals two more rate cuts in 2025

The US dollar index declined 0.2% following Minneapolis Fed President Kashkari's comments supporting two additional quarter-point rate cuts this year. Kashkari endorsed this week's rate reduction, citing unemployment risks that warrant Fed action. He noted the neutral rate has likely risen to 3.1%, suggesting Fed policy hasn't been as restrictive as previously thought. The Fed official remains open to accelerating cuts if labor market conditions deteriorate faster than expected, though he would pause if resilience continues or inflation rises. Regarding tariff impacts, Kashkari sees limited inflation risk, estimating increases unlikely to push inflation beyond 3%. His flexibility on future policy adjustments, including potential rate hikes if warranted, reinforces the data-dependent approach. For traders, this dovish stance supports continued dollar weakness against major currencies, with focus shifting to upcoming employment data.