Federal Reserve's Kashkari: Tariffs to Raise Rate Cut Threshold

On April 9th, Kashkari from the Federal Reserve stated that when considering the impact of tariffs on inflation, even if the economy begins to deteriorate, the Fed is unlikely to cut interest rates in the face of tariffs. Kashkari pointed out that Trump's tariffs are "much higher than anticipated and have a much broader scope." He expects these tariffs to reduce investment and economic growth and, "at least in the short term," to push up inflation. Kashkari wrote: "The barrier to making rate changes due to tariffs has grown. Given the significance of maintaining stable long-term inflation expectations and the potential for tariffs to boost near-term inflation, even with a weak economy and a possible increase in the unemployment rate, the threshold for rate cuts has also risen." He noted that recent inflation expectations indicators have started to rise. Due to the high inflation experienced in the United States in recent years, the Fed may not be able to ignore any tariff-driven price shocks. "Given the high inflation we have witnessed in recent years and the risk of long-term inflation expectations getting out of control, I believe our top priority must be to keep long-term inflation expectations stable," he said. (FXStreet)