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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