Neel Kashkari, President and CEO, Federal Reserve Bank of Minneapolis, spoke at the Milken Conference 2024 Global Conference Sessions at The Beverly Hilton in Beverly Hills, California, USA, May 7, 2024.
David Swanson Reuters
Minneapolis Federal Reserve President Neel Kashkari said Sunday that President-elect Donald Trump’s tariff proposals could increase long-term inflation if global trading partners strike again.
One-time rates, Kashkari said on CBS “Face the Nation,” “will not have a long-term effect on inflation.”
“The challenge is, if there is a tit for tat and it is one country imposing tariffs and then responding and escalating. That is where it becomes more about, and, frankly, a lot more uncertain,” said Kashkari.
During his first term, Trump essentially sparked a trade war with China when he imposed a series of tariffs on Chinese goods, prompting the country to retaliate with its own tariffs on the US.
One of Trump’s key economic proposals for his second term is to impose universal tariffs on all imports from all countries – with a 60% tariff specifically targeted at China.
Economists, Wall Street analysts and industry leaders have repeatedly expressed concern about the inflationary impact of such a hardline trade approach, particularly as inflation has begun to cool from pandemic-era peaks.
“We have made a lot of progress in reducing inflation,” Kashkari said. “I mean, I don’t want to declare victory yet. We have to finish the project, but we’re on a good path.”
The Fed on Thursday passed its second consecutive interest rate cut, continuing efforts to loosen monetary policy as inflation approaches the central bank’s 2% target. Kashkari said he expects the rest of the cuts to come in December, but it will depend on “what the data looks like” at that point.
As for Trump’s other major policy proposals like the immigrant deportation plan, Kashkari noted that the threat of inflation is still unclear and therefore the Fed is still taking a “wait and see” approach before adjusting policy.
Trump and his supporters like billionaire Tesla CEO Elon Musk have also spoken about their desire to give the president input on Fed policy decisions. The central bank sees political independence as a core feature that allows it to make monetary policy based on the health of the US economy, not electoral incentives.
But Kashkari said he’s not worried about politics spreading the Fed’s decision.
“I am sure that we will continue to focus on economic work,” he said. “That should dictate what we do and that should dictate what we do.”
