Minneapolis Federal Reserve President Neel Kashkari says he expects to see interest rates on hold for now as U.S. data have yet to show the full impact of tariffs. He also shares his thoughts on the U.S. housing market and the Fed's independence.

New York

Minneapolis Federal Reserve President Neel Kashkari stated that he expects interest rates to remain on hold for some time, as current economic data does not yet reflect the full impact of tariffs. He noted that the U.S. housing market remains subdued due to high mortgage rates and that the effects of tariffs and immigration policy on housing costs are still unfolding.

Kashkari emphasized the importance of the Federal Reserve's independence, highlighting bipartisan support in Congress and the institution's commitment to data-driven policy. He also addressed ongoing uncertainty in the U.S. economy, citing trade negotiations, immigration policy, and fiscal changes as contributing factors, and confirmed that the Fed is taking a cautious approach to reducing its balance sheet.

Minneapolis Fed's Kashkari expects rates to be on hold 'for a while'

You know, I think the next meeting is it's still too soon. I mean, just speaking for myself, my my colleagues will have to make their own choices. The next meeting, we're still getting data. A lot of the data that we're getting is still old. It still does not show the full effect of the tariffs. So my my best guess is we're going to be on hold here for a while. The housing market in the U.S., because mortgage rates have been high, at least by American standards, have been high for a few years. The housing market has really been quite frozen in the U.S. It seems like that's going to be continuing. We're not yet seeing the full effect of tariffs on the cost of inputs, the lumber that we might buy from Canada. That is not yet fully showing up yet. There's also an immigration component. A lot of homes in America are built by immigrant workers to the extent that there are fewer immigrants coming in to build homes that also could have an effect on the housing market in the U.S. With regards to the weakening recently of the U.S. dollar, with the Dixie falling below the 100 mark, Neil, is there any risk at all to the U.S. dollar dominance as the world's reserve currency, especially with all the various sort of disruptions and reordering of the of the global economic and trade order? You know, whatever currency is the quote unquote reserve currency, it really is the major economy that investors have the most confidence in. And if Asia is particularly strong or if China is particularly strong and the outlook is particularly optimistic or the euro zone, then those obviously could be credible competitors to the dollar. Right now, I still think the U.S. economy has the strongest fundamentals of any major economy. But ultimately, how this reordering of the global trade system, how it ultimately settles, I think it's far too soon to know, and it's something worth watching. Certainly is worth watching. Another thing worth watching is the the independence of the Fed. And and, you know, you're in the record as saying that naturally the the Fed's independence is absolutely foundational to economic success. How much of a threat is there, though? Do you feel too independent of the Fed right now? I think the Fed's independence is quite strong. We have ultimately our source of our strength institutionally comes from Congress. We are created by the United States Congress. I think leaders on both sides of the aisle, Republicans and Democrats in Congress, strongly believe in Fed independence. And everybody who works at the Federal Reserve is committed to Federal Reserve independence and conducting monetary policy, not focusing on politics, but focusing on data and analysis. And I'm confident that will continue. What is your frame of mind at the moment for quantitative tightening? Does that get put on hold for now? You know, we slowed it down a couple of months ago. We announced that we were slowing down the reduction of our balance sheet. There's an uncertainty about what is the fundamental demand for reserves in the U.S. banking system. And so as we get to that point of what we call ample reserves, we want to approach it slowly so that we don't tighten the balance sheet too far. So I think that we're doing the right things right now. We've shrunk the balance sheet by quite a bit over the past couple of years. It's continuing to shrink going forward. So I think we're on a good trajectory and I'm not anticipating some major shift in that anytime soon. I think you can pinpoint any time in history, any time in the market, and you can always say that there's going to be an element of uncertainty, which, of course, the markets really hate. Neil, but right now, do you feel that the uncertainty is particularly high compared to other periods that we've seen in the last few years? And what in particular, maybe apart from the tariffs, is it that keeps you up at night? Well, it is a very high period of uncertainty. You know, a couple of months ago, the shift of sentiment in the U.S. in January, I think there was exuberance amongst most businesses that I talked to by March, April that had dramatically changed. It reminded me of March of 2020 when COVID hit that dramatic change in sentiment and of the outlook. And so that uncertainty is still with us. There's still, I think, a long time to go for these trade negotiations to provide the ultimate clarity. I think in the U.S. there are big policy changes that are being undertaken right now. We've talked a lot about tariffs. Immigration policy is enormously important to the U.S. economy and the major countries around the world. That's another source of uncertainty. And then, of course, there are fiscal changes that are being deliberated in Congress right now. All of this is adding to just some uncertainty about what is the ultimate destination, what's the new normal for the U.S. economy. And I think businesses and households are trying to navigate that.

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