WASHINGTON, Feb 19 (Reuters) – The call by a top Trump administration official for New York Federal Reserve staff to “be disciplined” for recent research on tariffs was just the latest move by the administration to undermine the independence of the central bank, Minneapolis Fed president Neel Kashkari said on Thursday.
In a Wednesday CNBC interview, top administration economic adviser Kevin Hassett called recent New York Fed research “shoddy” in its conclusion that roughly 90% of the cost of the administration’s import tariffs were being paid by the U.S. The analysis, consistent with estimates by other economists and organizations, included among its authors a top economist in the New York Fed’s research division and a Columbia University professor who have collaborated together on several pieces of research on international prices and tariff impacts.
“This is just another step to try to compromise the Fed’s independence. Over the past year we’ve seen multiple attempts,” Kashkari said at an economic event in North Dakota, including the Department of Justice’s issuance of a grand jury subpoena of the Fed and the opening of a related criminal investigation of Fed chair Jerome Powell. President Donald Trump is also trying to fire Fed governor Lisa Cook, an issue pending before the U.S. Supreme Court.
The dispute “is really about monetary policy. We are doing our very best to make the best assessment of the economy based on data and analysis,” Kashkari said, at a moment when Trump has demanded that interest rates be slashed as low as 1%. The Fed’s current policy rate of interest is set in a range from 3.5% to 3.75%, and further cuts are unlikely for now given inflation is roughly a percentage point above the Fed’s 2% target.
“Politicians, conservative and liberal, would rather have monetary policy that serves their political needs in the moment,” Kashkari said, with Trump having cited both a desire for the government to borrow money more cheaply and to lower home mortgage interest rates among his reasons for wanting the Fed to cut.
The administration’s moves against the Fed, however, have led to some political blowback and complicated the confirmation as Fed chair of Kevin Warsh, who Trump has nominated to replace current Chair Jerome Powell when his term leading the central bank ends in May. Some Republican senators have demanded the criminal probe of Powell be dropped before they will allow Warsh’s nomination to proceed.
Kashkari said the role of the research departments at the 12 regional Fed banks was central to how the institution operates.
“All 12 reserve banks have independent research departments that are always studying the economy,” Kashkari said. “That is how we’re trying to get better and learn.”
(Reporting by Howard Schneider; Editing by Chizu Nomiyama and Franklin Paul)
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