On April 9, the Federal Reserve's Kashkari stated that considering the impact of tariffs on inflation, the Federal Reserve is unlikely to cut rates in the face of tariffs, even if the economy begins to deteriorate.
Kashkari said that Trump's tariffs are "much higher and broader than expected," and he anticipates that these tariffs will reduce investment and economic growth, and drive up inflation "at least in the short term".
Kashkari wrote: "The barriers to changing rates in some way due to tariffs have increased." "Given the importance of maintaining long-term inflation expectations and the potential for tariffs to boost near-term inflation, the threshold for rate cuts is higher, even in a scenario of economic weakness and potentially rising unemployment."
He pointed out that recent inflation expectation indicators have already begun to rise, and the United States' experience with high inflation 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 and the risk of uncontrolled long-term inflation expectations, I believe our top priority must be maintaining stable long-term inflation expectations," he said. (Jinshi)
