Federal Reserve Kashkari: Tariffs will raise the threshold for rate cuts

The Fed is unlikely to cut interest rates in the face of tariffs, even if the economy starts to deteriorate, given their impact on inflation, Mr. Kashkari said. Mr. Trump's tariffs are "much higher and much broader than expected," Mr. Kashkari said, and he expected them to reduce investment and economic growth and push up inflation "at least in the short term." As a result of the tariffs, the barriers to changing interest rates in one way or another have increased, "Mr. Kashkari wrote." Given the importance of keeping long-term inflation expectations stable, and the potential for tariffs to boost near-term inflation, the bar for rate cuts is higher, even in a weak economy and a likely rise in unemployment. " He pointed to recent measures of inflation expectations that have started to rise, as well as years of high US inflation, as reasons why the Fed might not be able to ignore any tariff-driven price shocks. "Given the high inflation we have experienced in recent years and the risk of runaway long-term inflation expectations, I think our priority must be to keep long-term inflation expectations stable," he said.