Federal Reserve's Kashkari warns: Trade and immigration policies are exacerbating the uncertainty of interest rate cuts before September
Minneapolis Federal Reserve President Neel Kashkari warned that significant changes in U.S. trade and immigration policies have increased the uncertainty for the Federal Reserve to adjust interest rates before September. He stated that the tariff negotiations under the Trump administration could impact economic activity and the path of monetary policy. Kashkari pointed out that if a trade agreement is reached in the coming months, it would provide policy clarity. Recently, Federal Reserve officials have suggested that the wait-and-see attitude regarding interest rate adjustments may persist for several months until the tariff policies and their economic impacts become clearer
According to the Zhitong Finance APP, Minneapolis Federal Reserve President Neel Kashkari stated that significant changes in U.S. trade and immigration policies are creating uncertainty for Federal Reserve officials in adjusting interest rates before September. The current Trump administration is negotiating tariffs with multiple countries.
In an interview in Tokyo on Monday, Kashkari said, "Anything is possible," but added, "Will the situation be clear enough to make decisions by September? I'm not sure right now. We need to look at the data performance and observe the progress of negotiations." He further stated that if the U.S. reaches a trade agreement with other countries in the coming months, "it will provide the policy clarity we need."
Although the U.S. economy remains robust into early 2025, Trump's tariff policies and significant reforms to the immigration system have prompted businesses to reassess their investment plans. The widely anticipated tariff increases could drive up inflation while suppressing growth due to reduced business investment and household spending.
Kashkari, along with other central bank officials such as Chicago Fed President Charles Evans, indicated that the threshold for rate cuts remains high in the near term.
Kashkari admitted, "This uncertainty is dragging down economic activity and presenting us with decision-making challenges because we cannot determine the ultimate direction of events, making it difficult to clarify the monetary policy path."
In the past week, several Federal Reserve policymakers hinted that their wait-and-see attitude toward interest rate adjustments may last for months until the clarity of tariff policies and their economic impacts emerges.
Last week, Trump intensified uncertainty—first threatening to impose a 50% tariff on EU imports, then delaying the implementation date to July 9. He also warned of a potential 25% tariff on non-U.S. manufactured devices from Apple and Samsung.
The Supreme Court ruled last week that the Federal Reserve is not subject to Trump's attempts to dismiss officials from independent federal agencies.
Although the ruling allows Trump to replace officials from two other agencies, the court explicitly stated that this decision does not apply to the Federal Reserve, calling it a "structurally unique, semi-private entity." This ruling seems to protect Chairman Jerome Powell from direct dismissal, but it remains unclear whether it can prevent Trump from revoking his chairmanship.
Last month, Trump sent mixed signals: on April 17, he posted on social media that he "couldn't wait to fire Powell," but days later told reporters he had no intention of replacing him.
Kashkari pointed out on Monday that the biggest risks to the U.S. economy come from unresolved major new policies such as trade barriers and immigration policies. "I hope the relevant negotiations can progress more quickly to provide policy certainty."
