The ongoing tariff war between the US and China raises concerns about inflation and economic slowdown. Minneapolis Fed President Neel Kashkari explained how these impacts affect the Federal Reserve's decision-making.
Impact of Tariffs on Fed Decisions
Neel Kashkari noted that the Fed is less likely to cut interest rates amid tariff measures related to inflation. He characterized President Donald Trump's tariff decision as 'much higher and broader than expected.'
Short-Term Forecasts
Kashkari predicted that tariffs will reduce investment and economic growth while increasing inflation 'at least in the near term.' He emphasized that 'the obstacles to changing the policy rate have increased due to tariffs,' and that short-term inflation will lead to declining purchasing power.
Conclusion on Long-Term Prospects
According to Kashkari, maintaining stable long-term inflation expectations is essential. It is important to consider the impact of tariffs on the economy and not overlook its consequences in terms of monetary policy.
Senior Fed officials continue to highlight the significant impact of tariffs on the national economic situation. The future of monetary policy will depend on how quickly and successfully uncertainties related to tariff measures can be resolved.
