Fed’s Kashkari: No monetary policy response should be off the table

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, warned on Wednesday that last week’s wide-ranging tariffs could unsettle people’s expectations about inflation.

Key Quotes

No monetary policy response, up or down, should be off the table.

Hurdle to changing policy rate has increased due to tariffs.

Bar is higher for cutting rates even if economy, labour market weakens.

Falling neutral rate due to tariffs reduces immediate need for rate hike.

Risk of unanchoring inflation expectations seems to have increased notably.

"Too risky" to look through inflation effects of tariffs.

First priority must be keeping long-run inflation expectations anchored.

Announced tariffs much higher, broader than expected, resulting in larger economic effect and shock to confidence.

Near-term inflation will climb, purchasing power will go down, investment will likely be lower, and GDP will be smaller due to tariffs.

Once confident on inflation expectations, could then focus on trade-offs between goals.