Federal Reserve Bank of Minneapolis President Neel Kashkari said Sunday that the U.S. tariff standoff with Canada could extend five years of above-target inflation, framing a fresh trade risk days before Fed Chair Kevin Warsh delivers his first Jackson Hole speech to a jittery bond market.
Kashkari's remarks on CBS's "Face the Nation" tied the White House's newest trade front directly to the price pressure that has kept the Federal Open Market Committee from cutting rates. They set an unfriendly stage for Warsh's Friday address at the Kansas City Fed's annual research symposium: the $30 trillion U.S. government debt market has been selling off, the 30-year Treasury yield sits near a two-decade high, and Treasury Secretary Scott Bessent's move last week to at least double planned bond buybacks failed within a day to pull long-term rates down.
What Kashkari said
"The longer there's back and forth on the trade front, just like the longer there's back and forth in the conflict of Iran, the imprint and inflation end up being extended and delayed," Kashkari said. He called Canada "an important trading partner for America" and placed trade shocks alongside the war with Iran as forces sustaining elevated U.S. inflation. Fifty percent U.S. tariffs on Canadian goods took effect Saturday after negotiations collapsed, and Prime Minister Mark Carney has promised matching duties on Sept. 8.
The Warsh test
Warsh, whom President Trump appointed and who took over the Fed this year, has told reporters he does not want to "spoon-feed" markets and has floated using Jackson Hole for "bigger questions" of productivity and demographics. Traders and analysts want the opposite. Adam Posen, president of the Peterson Institute for International Economics, told Reuters that "Both the bond market and the FOMC have clearly decided to wake up" to persistent inflation and said Warsh should signal there is "reason to consider a hike in coming months" if the data does not turn.
An activist Treasury
Bessent's expanded buybacks and his public support for long-dated bonds have crowded into terrain Fed chairs usually navigate alone. "We are in a regime where activist Treasury policy is as material – for good and for bad – as central bank policy. The interaction of the two will be key to the outlook," former New York Fed official Krishna Guha wrote in a note cited by Reuters. Guha said Warsh has argued the Fed should let the yield curve set itself and has even suggested long-end tightening might outrun short-end tightening — a stance, he added, that is hard to defend when "investors see Bessent as trying to manage the long end". U.S. gross federal debt topped $40 trillion for the first time last week.
The absent voice
Trump, who nominated Warsh, has publicly pressed the Fed to cut rates, and Senate Banking Committee Democrats have asked for details of what The Wall Street Journal has reported are regular calls between the two men. But no Fed dove, White House official or Trump ally appeared in the day's reporting to argue that the tariff-driven price pressure Kashkari described is temporary, or that a September hike is uncalled for. The case for Warsh to hold rates — or cut them, as the president wants — reaches readers through reporter paraphrase, not from a source on the record.
Warsh speaks Friday morning at Jackson Hole. The FOMC's next scheduled rate decision follows in September.