U.S. Central Bank (Federal Reserve)
Fed’s Kashkari says two more rate cuts are warranted this year as tariffs have a limited impact on inflation.
Published on Sat, Sep 20, 2025, at 8:47 AM EDT; updated on Sat, Sep 20, 2025, at 1:45 PM EDT
KEY POINTS
• Minneapolis Fed President Neel Kashkari said Friday he expects tariffs will have only a limited long-term impact on inflation, creating space for several interest rate cuts in the future.
• Kashkari noted that a weakening labor market, along with the limited effect of tariffs, gives him grounds to support a somewhat more accommodative policy stance.
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Minneapolis Federal Reserve President Neel Kashkari said Friday that he sees President Donald Trump’s tariffs putting only minimal long-term pressure on inflation, which he believes allows scope for several upcoming interest rate cuts.
Speaking to CNBC, Kashkari explained why he supports reducing the Fed’s benchmark lending rate at both of the remaining meetings this year, on top of the cut already approved Wednesday by the Federal Open Market Committee. That would amount to three reductions in total — one more than he had previously endorsed in the committee’s “dot plot.”
The more dovish stance on rates comes despite inflation remaining above the Fed’s 2% target. Kashkari, however, pointed to a softening labor market and the limited effect of Trump’s tariffs as reasons to push for somewhat looser policy. The federal funds rate is currently set between 4% and 4.25%.
“It ultimately comes down to whether tariffs are a one-time shock or a lasting factor,” he said on CNBC’s Squawk Box. “I’m increasingly confident they’re more of a one-time effect, though it may take a few years to fully work through.”
Kashkari does not hold a vote on the FOMC this year, but he will gain voting rights in 2026.
The committee voted 11-1 in favor of a quarter-point rate cut, a wider margin than many on Wall Street had expected given the apparent diversity of views among officials. It also marked the first meeting for new Governor Stephen Miran, a Trump appointee who has been outspoken in his criticism of Chair Jerome Powell and the Fed overall.
Kashkari, however, suggested there were no signs of discord during the meeting.
“What stood out about this meeting was just how ordinary it turned out to be,” he said.
Kashkari detailed his reasoning explained his rationale for supporting a total of three rate cuts this year in an article on the Minneapolis Fed website.
In the essay, he pointed out that inflation expectations remain subdued, despite concerns that tariffs might trigger another surge in prices. He also observed that both housing inflation and wage growth are moderating.
Yet, August’s consumer price index showed annual core inflation at 3.1%, well above the Fed’s target, raising questions about whether policymakers are comfortable with the elevated level.
“We’re not okay with 3% inflation,” Kashkari sa id.
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