Kashkari's Call: Holding Steady Amid Tariff Turbulence

Neel Kashkari, head of the Federal Reserve Bank of Minnesota, has emphasized the importance of maintaining current interest rates in light of uncertainties caused by the recent spate of tariffs. Speaking at a Bank of Japan conference, Kashkari warned of overlooking the impact of tariff-induced price shocks on inflation.

Kashkari highlighted the tension within the Federal Reserve as it navigates between combating inflation and supporting economic activity amid evolving U.S. trade policies. He noted that some policymakers deem tariff impacts as temporary, advocating for interest rate cuts to boost growth; however, he expressed caution.

Given the prolonged inflation above the Federal Reserve's 2% target and uncertain resolution timelines for trade negotiations, Kashkari stressed the need for stable policy rates. He underscored the significance of defending long-term inflation expectations while navigating potential tit-for-tat tariff escalations.

(With inputs from agencies.)