Fed’s Kashkari: Can’t allow inflation expectations to get unanchored
Source Fxstreet
Minneapolis Fed President Neel Kashkari warned that US tariffs act as a drag on economic growth and emphasised the central bank’s responsibility to prevent those trade measures from fuelling longer-term inflation.
Key Quotes
- Independent monetary policy leads to better economic outcomes, is foundational.
- Notes that his own change from dove to hawk to current moderate came from analysis of data.
- Fed policymakers are making best call they can, based on data. That's what independence means.
- Tariffs are somewhat inflationary.
- Tariffs also slow growth.
- Fed's one tool is in tension.
- Too soon to judge path of interest rates.
- Logical that tariff leads to one-time increase in prices, but backdrop of high inflation runs risk of unanchoring inflation expectations.
- Can't allow inflation expectations to get unanchored.
- So far long-run inflation expectations have not moved much. Fed's job to make sure they don't.
- Fed's job is to make sure tariffs don't lead to longer-term inflation.
- To no longer have a trade deficit, investors would have to conclude US is no longer best place to invest.
- Still early to tell if that's happening.
- Bond yield up and dollar down indicates some reassessment of where global investors want to invest.
- All of this can change quickly, with resolution of trade uncertainty.
- Haven't seen this level of anxiety since COVID hit.
- Interest rate level in US is largely influenced by capital flows.
Disclaimer: For information purposes only. Past performance is not indicative of future results.
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The downturn occurred despite the reopening of the U.S. government on Thursday, which many had hoped would provide essential support for crypto markets. This year initially appeared promising for cryptocurrencies, particularly after the inauguration of President Donald Trump, who has established the most pro-crypto administration thus far. However, ongoing political tensions—including Trump's tariff strategies and the recent government shutdown, lasting a historic 43 days—have contributed to several rapid price pullbacks for Bitcoin throughout the year.
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Notably, Bitcoin is not alone in its struggles, as Ethereum and Solana have also recorded declines of 7.95% and 28.3%, respectively, since the start of the year, while numerous altcoins have faced even steeper losses.
Looking ahead, questions linger regarding the viability of the four-year cycle thesis, particularly given the increasing institutional support and regulatory frameworks now in place in the crypto landscape. Matt Hougan, chief investment officer at Bitwise, remains optimistic, suggesting a potential Bitcoin resurgence in 2026 driven by the “debasement trade” thesis and a broader trend toward increased adoption of stablecoins, tokenization, and decentralized finance. Hougan emphasized the soundness of the underlying fundamentals, pointing to a positive outlook for the sector in the longer term.
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