Title: Minneapolis Fed Chief Warns of Potential Inflation Surge from Trump’s Tariff Plans
On May 7, 2024, Neel Kashkari, the head of the Federal Reserve Bank of Minneapolis, addressed a global audience at the Milken Conference 2024 Global Conference Sessions in Beverly Hills, California. Kashkari expressed concerns over President-elect Donald Trump’s proposed trade policies, particularly the imposition of tariffs, and their potential impact on long-term inflation.
Kashkari, during his appearance on CBS’ “Face the Nation,” mentioned that temporary tariffs wouldn’t significantly affect inflation in the long run. However, he emphasized the issue arises when these tariffs trigger a retaliatory response from trade partners, leading to a cycle of escalating tariffs. This scenario, he warned, could fuel inflation and create economic uncertainty.
In his first term, Trump had notably established a pattern of implementing import taxes on Chinese goods, a move that instigated China to respond with its own tariffs on American products. As part of his economic strategy for his second term, Trump proposed a blanket tariff on all imports, with a special focus on a 60% rate on China.
Economic experts, market analysts, and industry heads have frequently voiced their worries regarding the inflationary repercussions of such a rigid trade stance. These concerns have been amplified by the recent cooling off of inflation from its pandemic-era highs.
Despite the looming threat, Kashkari expressed optimism about the progress made in taming inflation. He stopped short of declaring complete success, emphasizing the need to stay the course and maintain the downward inflation trend.
Last Thursday, the Federal Reserve implemented its second straight interest rate cut, aiming to further relax monetary policy as inflation nears the central bank’s 2% benchmark. Kashkari predicted another cut in December, contingent on the economic data available at the time.
Regarding Trump’s other proposed policies, such as a comprehensive immigrant deportation plan, Kashkari stated that the potential impact on inflation remains uncertain. As a result, the Fed has adopted a ‘wait and see’ stance before making any policy adjustments.
Despite public calls from Trump supporters, including Tesla CEO Elon Musk, for the president to have input on Federal Reserve policy decisions, Kashkari remained confident in the bank’s political independence. He emphasized the Fed’s focus on shaping monetary policy based on the U.S. economy’s health, not political motivations.
Kashkari assured that the Federal Reserve would continue to prioritize its economic responsibilities and that such responsibilities would guide their actions.
