Kashkari advocates two more rate cuts this year as he sees limited tariff impact on inflation
News Summary
Minneapolis Federal Reserve President Neel Kashkari indicated he expects minimal long-term inflationary pressure from President Donald Trump’s tariffs. This outlook supports his call for additional interest rate reductions. Kashkari advocates for the Federal Reserve to implement two more rate cuts this year, following the one already approved by the Federal Open Market Committee (FOMC). This brings his total expected cuts to three for the year, an increase from his prior “dot plot” projection. Despite inflation exceeding the central bank’s 2% target, Kashkari’s more dovish stance is driven by a weakening labor market and his belief that tariffs will have a muted, “one-time effect” on inflation, playing out over a couple of years. He noted the recent FOMC meeting, which included new Trump appointee Governor Stephen Miran, was surprisingly unremarkable despite the 11-1 vote for the latest quarter-point cut.
Background
The Federal Reserve is tasked with a dual mandate of achieving maximum employment and stable prices. In 2025, inflation has been running above its 2% target, presenting a dilemma for the Fed's interest rate policy: how to curb inflation without triggering an economic downturn. Following his re-election in 2024, President Donald Trump's administration has continued to pursue protectionist trade policies, including the imposition of tariffs on imported goods. While these tariffs aim to protect domestic industries, they also have the potential to raise import prices and contribute to inflation. Federal Reserve officials hold differing views on the long-term impact of tariffs and how they should factor into monetary policy decisions. The Federal Open Market Committee (FOMC) is the primary monetary policymaking body of the Federal Reserve, comprising 12 members, including the 7 governors, the president of the Federal Reserve Bank of New York, and presidents of four other Federal Reserve Banks on a rotating basis. Neel Kashkari does not have a vote on the FOMC in 2025, but he will in 2026, making his current views influential for future policy direction, even if not immediately impactful.
In-Depth AI Insights
Is Kashkari's assessment of tariffs as a