Kashkari Addresses Fed's Rate Policy Amid Tariff Impact

Neel Kashkari, President of the Minneapolis Federal Reserve, emphasized the challenges posed by President Trump's recent tariffs during a public address and in various essays. He noted that the tariffs are significantly higher and broader than anticipated, which could hinder investment and economic growth while increasing inflation. This situation complicates the Fed's ability to adjust interest rates, raising the threshold for both cuts and hikes amid fears of unanchoring inflation expectations. Kashkari warned that the tariffs could function like a consumption tax, leading to higher prices and reduced consumer purchasing power. He highlighted the potential for diminished economic confidence, which could exacerbate spending and investment declines, possibly pushing the economy towards a recession. As a result, the Fed remains in a holding pattern, with no immediate policy changes expected despite the economic pressures from the tariffs.