Fed's Kashkari Cautions on Delayed Tariff Impact Despite Positive Inflation Data

Minneapolis Federal Reserve President Neel Kashkari said recent U.S. inflation data has been encouraging but warned that the full inflationary impact of tariffs might still be ahead. Speaking to the Montana Chamber of Commerce on Thursday, Kashkari emphasized a cautious approach to interest rate policy due to ongoing trade uncertainties.

“We’ve been saying we need to go slow until we understand the inflationary effects of tariffs,” Kashkari noted, highlighting that higher costs from tariffs are likely to be passed on by businesses. However, he added that some companies are holding off on price hikes, hoping that tariff rates will return to normal.

“Businesses don’t want to risk upsetting their customers if the tariffs prove temporary,” he explained. This delay in passing on costs could mean that inflationary effects are lagging behind current data, potentially complicating the Federal Reserve’s rate decisions.

Kashkari also pointed out that markets often find ways to navigate around trade barriers, which may limit the overall inflationary pressure. “Products have a way of moving through or around barriers,” he said, suggesting the real economic impact could be smaller than feared if businesses adjust supply chains effectively.

Despite the recent positive inflation trends, Kashkari reiterated that the Fed needs more clarity on how tariffs will influence the broader economy. “There’s still a lot of uncertainty, and we’re waiting to see how negotiations unfold,” he said.

With trade policies in flux and global supply chains adapting, the Fed remains cautious about committing to a firm monetary policy path. Kashkari’s remarks underline the complexity of balancing inflation data with unpredictable external pressures like tariffs in shaping future interest rate moves.