Kashari said he has left his rate projections for 2025 unchanged since December. At that point, Fed policymakers had delivered a full percentage point of cuts, all in the final four months of the year, as price pressures cooled and the labor market showed signs of weakness. He expected just two cuts then because he was unsure inflation would continue to fall in this year, he wrote.
He kept that projection in March amid heightened tariff uncertainty and little further progress on inflation. Now, though there hasn’t been much evidence of a hit to prices from tariffs, he worries that may still materialize later this year.Kashkari said his forecast for two rate cuts implies the first would come in September.
Fed officials left rates unchanged when they met last week. Since then, two Fed governors, Christopher Waller and Michelle Bowman, have signaled they might back lowering rates as early as next month. But most policymakers who spoke this week, including Kashkari, made clear they aren’t seriously considering a move in July.
President Donald Trump has repeatedly lashed out at Federal Reserve Chair Jerome Powell over over the bank’s position to hold interest rates steady.
In the essay, the Minneapolis Fed chief also said that the US central bank shouldn’t be bound to a particular policy path even if it resumes lowering rates in September.
“If the data called for it, we could hold the policy rate at the new level until we gained greater confidence that inflation was headed back to our target,” Kashkari wrote.
Kashkari praised the economy’s resilience in the face of higher-than-expected tariff announcements in April and said the labor market has “cooled gently.”
He said business leaders he’s spoken with have expressed a reluctance to pass tariff costs on to customers, but that if trade deals aren’t struck and tariff rates remain high, they might have to do so. Kashkari also pointed to the time required to ship goods to the US from Asia as another reason the tariff effect may materialise later.
