Fed's Kashkari: Tariffs will raise threshold for rate cuts

Kashkari of the Federal Reserve said that considering the impact of tariffs on inflation, even if the economy starts to deteriorate, the Federal Reserve is unlikely to cut interest rates in the face of tariffs. Kashkari said that Trump's tariffs are "much higher than expected and much broader in scope," and he expects that these tariffs will reduce investment and economic growth, and "at least in the short term" push up inflation. Kashkari wrote: "Obstacles to changing interest rates in some way have increased due to tariffs." "Given that maintaining stable long-term inflation expectations is crucial, and tariffs may boost short-term inflation, the threshold for cutting interest rates is higher even in the event of a weak economy and possible rise in unemployment." He pointed out that recent inflation expectations indicators have started to rise, as well as the high inflation experience in the United States over the years, are reasons why the Federal Reserve may not be able to ignore any tariff-driven price shocks. "Given the high inflation we have experienced in recent years, as well as the risk of long-term inflation expectations getting out of control, I believe our top priority must be to maintain stable long-term inflation expectations," he said.