Fed’s Kashkari Supports Holding Rates Amid Tariff Uncertainty

Minneapolis Fed President Neel Kashkari has expressed caution regarding the Federal Reserve's response to inflationary pressures stemming from recent U.S. tariffs, emphasizing the importance of maintaining current interest rates until there is more clarity on their impact. While some Fed policymakers consider these tariff-induced price increases as temporary shocks that could warrant interest rate cuts to support economic growth, Kashkari finds the opposing view more compelling due to the prolonged uncertainty and risk of retaliatory tariffs. He warned that trade negotiations might take months or years to resolve, with tariff effects gradually passing through to final prices, potentially causing sustained inflation above the Fed's 2% target. Kashkari highlighted the need to defend long-term inflation expectations amid these challenges and stressed that current policy is only modestly restrictive, justifying a wait-and-see approach. His remarks reflect a broader debate within the Fed about how to balance inflation control with economic support in the face of ongoing trade tensions. Overall, Kashkari advocates for holding rates steady to avoid premature easing until the full economic consequences of tariffs become clearer.