The head of the Minneapolis Federal Reserve warned the central bank may have put the U.S. economy in a “dangerous position” by continually raising interest rates in years past, echoing President Trump’s own criticisms of the Fed.
Neel Kashkari, president of the Minneapolis Fed, made the comments Tuesday to the Washington Post. The Fed lowered rates in July for the first time since the 2008 financial crisis and cut rates again by a quarter percentage point last week.
“I’m concerned that we’ve needlessly raised interest rates over the past three years and put the economy into a more dangerous position that makes it more vulnerable to shocks that could hit us,” said Kashkari. “Why are we trying to contract the economy?”
Trump has repeatedly blamed the Fed and Chairman Jerome Powell, whom he tapped to replace Janet Yellen last year, for holding back economic growth. The president this month urged the central bank to cut interest rates to zero and lamented the United States has been put at a disadvantage because some European countries have negative interest rates.
After the Fed slashed rates last week, Trump again derided the Fed and Powell, saying they have “no guts, no sense, no vision.”
Kashkari said he wants to see rates fall to under 1.5% and pushed for a steeper decrease in rates when the Fed’s policy-making committee met in Washington last week. But he said he hopes “we don’t end up back at zero.”
Bolstered by strong consumer spending, the U.S. economy has experienced continued growth. But Trump’s ongoing trade war is expected for the first time to hit Americans in their pocketbooks, as the president slapped 15% tariffs on a wide swath of consumer goods shipped from China. The first round of the 15% levies went into effect Sept. 1, and the second batch will hit Dec. 15.
The protracted trade dispute with China is the “big elephant out there,” said Kashkari, and presents a “growing risk.”
“It’s so hard for me to predict whether any kind of a deal will be reached. And will the deal be a real deal or will it be something in name only? I don’t know. It continues to be a big uncertainty,” he said.
Trump’s timeline for a trade agreement with China has continued to shift. On Friday, the president expressed confidence a deal would be reached, but told reporters it doesn’t have to be made before the 2020 presidential election. But Trump told reporters Wednesday a trade deal “could happen sooner than you think.”
Representatives from the U.S. and China met for further negotiations last week, and talks are scheduled again for next month.
