Minneapolis Fed President Neel Kashkari raised concerns on Monday about the potential for President Trump’s trade tariffs to create a stagflationary environment, a scenario where economic growth slows and prices rise at the same time.

Impact of Tariff-Driven Supply Shocks

Kashkari spoke with Bloomberg TV, highlighting that U.S. consumers have not yet fully experienced the effects of increased import duties. He stated, “The impact of tariffs is undeniably stagflationary,” emphasizing that the long-term effects will depend on the level and duration of these tariffs amidst ongoing policy uncertainty.

Rate-Setting Challenges Ahead

As Treasury yields rise and investors reassess U.S. assets, Kashkari sees little likelihood of the Fed adjusting interest rates by September without clearer outcomes from ongoing trade negotiations. Market participants can keep up with upcoming Fed speeches and decisions, including Kashkari’s upcoming remarks, to stay informed on shifts in monetary policy direction.

Strategic Balancing Act Required

Kashkari acknowledges that if tariffs persist, they could lead to entrenched higher inflation. However, if a quick resolution occurs or if tariffs are short-lived, stagflationary concerns might lessen. As the Fed tackles these supply-side challenges alongside evolving labor market conditions, providing transparent policy guidance will be vital for fostering both price stability and growth prospects.