The following is a transcript of an interview with Neel Kashkari, Minneapolis Federal Reserve president, on “Face the Nation with Margaret Brennan” that aired on Nov. 10, 2024.
MARGARET BRENNAN: We turn now to the economy and Minneapolis Federal Reserve President, Neel Kashkari, he joins us now. Neel, good morning to you.
NEEL KASHKARI: Good morning. Margaret,
MARGARET BRENNAN: So right after the election, another big event was the Federal Reserve moving on interest rates, cutting them for the second time so far this year. That seems to indicate that you believe inflation is being defeated here. Can you tell us your assessment of how stable the economy is and how confident you are that we are on a glide path that will avoid recession?
NEEL KASHKARI: Well, we’ve made a lot of progress in bringing inflation down, and the economy has remained remarkably strong. We keep getting revisions to GDP that are- show that the economy is growing even faster than we had appreciated, and the unemployment rate is 4.1% so right now, the economy is in a good place. Inflation is still running around 2.5% or so, so we’re not all the way home. We need to finish the job, but so far so good. I mean, I don’t want to declare victory yet. We need to finish the job, but we’re on a good path right now.
MARGARET BRENNAN: Finish the job. It sounds like you’re expecting another rate cut.
NEEL KASHKARI: Well, we want to have confidence that inflation is going to go all the way back down to our 2% target. So if you look at the what we call the summary of economic projections, which are the forecast that my colleagues and I put out. The expectation is that we would do another interest rate cut in December. We need to actually see what the data looks like before reaching any conclusions, and that’s six weeks from now. But I think another rate cut is certainly possible. But ultimately, if the economy continues to perform well, a strong economy, a strong labor market that’s going to that’s the outcome that we’re all trying to achieve. And I don’t think that that’s a partisan view. I think everybody’s on board with trying to achieve that.
MARGARET BRENNAN: The Fed is apolitical but we are looking at promises of major changes in this new administration. One of them is mass deportations. When you were last here in June, we talked about the impact of immigration on inflation, you said, in some ways, it helps lower it by filling jobs. At the same time, you said it may contribute to it because it creates more demand for goods. How long before we would see the economic impact of, say, a mass deportation plan?
NEEL KASHKARI: Well, it’s a great question. Margaret, I mean, I think if you just assume that people are working, either working in farms or working in factories, and then those businesses now lose employees, that would probably cause some disruption for those businesses as they try to respond to that. And so the implications for inflation are not entirely clear to me. I think ultimately it’s going to be between the business community and Congress and the executive branch to figure out what you know, how they would adjust to that, and how, how long it would take, and how disruptive it would be. I don’t have any insight into that. I’m not sure what the inflation implications would be. I think it’s a big question of how long it would take, how many new immigrants were coming in. There’s just so much uncertainty about what the actual policies will be, what will get passed through the Congress, how it will be implemented. We at the Fed will simply wait. We have to wait and see what the rest of the government decides to do before we analyze what it means for the economy going forward.
MARGARET BRENNAN: And I know you don’t control fiscal policy, but the President Elect has unveiled a plan that estimates say would add 8 trillion to the deficit. How concerned are you about rising deficits?
NEEL KASHKARI: Well if you look over the long term, if you look at, for example, at the Congressional Budget Office forecast of debts and deficits, they grow to the moon. They grow unsustainably, so at some point, those have to be addressed, and that is purely the domain of the Congress and the executive branch to negotiate how to do that. At some point they have to be addressed. And so our focus is whatever Congress and the administration decide to do, we have our goals. Our goals are 2% inflation and a strong labor market, maximum employment, and we will adjust our monetary policies to try to achieve that, but you’re right. Over the long run, it’s clear that the deficit needs to be addressed, but that is also, as I said, the domain of Congress and the executive branch to sort out.
MARGARET BRENNAN: Goldman Sachs analysts were out this week with a report saying that the last time we saw Trump tariffs, the cost was passed along to consumers. They estimate every 5% increase in the tariff rate would reduce corporate earnings per share by one to two percent because it would pull back consumer spending, possibly trigger retaliatory tariffs and increased uncertainty. How much of a downside risk is there if we get into this business of tariffs?
NEEL KASHKARI: Well, from an inflation perspective, it’s pretty easy to model a one time tariff, so if somebody imposed a 1% tariff or a 10% tariff, you would think that that would increase prices of those goods either 1% or 10%. That’s pretty easy to model, and it shouldn’t have an effect long run on inflation. The challenge becomes, if there’s a tit for tat. And it’s one country imposing tariffs and then responses, and it’s escalating, that’s where it becomes more concerning, and, frankly, a lot more uncertain. So I think again, with, as is with fiscal policy, we’ll have to wait and see what actually gets implemented, and then how other countries might respond to that. It’s just right now we’re just all guessing what will actually happen.
MARGARET BRENNAN: But it’s safe to say that the new president will take office with what appears to be the economy trending upwards?
NEEL KASHKARI: The economy is strong. You know, when I reach out to businesses and labor unions all around my region, it’s one of cautious optimism that the economy is doing well. There are jobs available, and we want to keep the economy doing well. We want to keep that growth going while we get inflation all the way back down to 2% and so right now, I would say we have a strong economy, and that’s a really good thing, and our objective is to keep it there.
MARGARET BRENNAN: Chair Powell was asked this week at a press conference if he would resign if asked, he made clear he does not think that the law would require that, and in fact, it would violate the law. But there is a broader conversation right now about political influence on the Fed. Are you concerned about it?
NEEL KASHKARI: I’m not. My colleagues and I at the Federal Reserve are totally committed to the dual mandate goals of 2% inflation and maximum employment that Congress has assigned us. That’s what’s driving the decisions that we’ve been making, and that will continue to do so. And there are also structural elements that are designed by Congress to provide continuity. So the governors at the Board of Governors in Washington serve up to 14 year terms. The presidents of the Reserve Banks are independent. These are structures that Congress put in place to provide continuity between that and I think, bipartisan support that we all want to get inflation back down to 2% and we want to keep the economy strong. I’m confident that we will continue to focus on our economic jobs, and that’s what should be dictating what we’re doing, and that is what’s dictating what we’re doing.
MARGARET BRENNAN: Neel Kashkari, thank you for your time today. We’ll be back in a moment.
