The following is a transcript of an interview with Neel Kashkari, president of the Minneapolis Federal Reserve, on “Face the Nation” that aired on June 16, 2024.

MARGARET BRENNAN: And we go now to the president of the Minneapolis Federal Reserve, Neel Kashkari, and he joins us from Minneapolis. Neel, this past week you all decided to keep interest rates where they are. But in Canada, in Europe, they’re seeing promising signs of inflation. And they did cut. What more do you need to see?

NEEL KASHKARI: Well, Margaret, we need to see more evidence to convince us that inflation is well on our way back down to 2%. The good news is, as your reporting just indicated, the job market remains strong. But there’s a really important difference between the U.S. and those other countries. The U.S. economic fundamentals are much stronger than in most other advanced economies around the world. So they’re facing declining inflation and economic weakness. We’re facing declining inflation slowly, but economic strength, and that’s what’s leading to this divergence in monetary policies.

MARGARET BRENNAN: You just said the jobs market is remaining strong. When you were last here, you said you personally don’t think it’s realistic we could end this inflation cycle with no cost to the job market. We are starting to see jobless claims tick up a bit. Do you expect to see more of that in the weeks and months to come?

KASHKARI: It’s certainly possible. The job market has performed much better than I had expected. I thought when we raised rates so quickly and so aggressively, that we’d be tapping the brakes harder on the job market. That hasn’t yet happened. When I talk to businesses all around my region, they’re still hiring by and large, and they’re- they’re still having to compete to find workers. But it’s not the overheated job market that we saw a year or two ago. So there may be more cooling yet to come. I hope it’s modest cooling, and then we can get back down to more of a balanced economy. 

MARGARET BRENNAN: Bank of America predicts that the Fed will cut rates once this year, but that they’ll wait until December to do it. What do you think of that prediction?

KASHKARI: You know, I think that’s a reasonable prediction. If you look at the- what we call the Summary of Economic Projections that my colleagues and I all put out this past week, the- the median forecast was for one cut this year. It’s really going to depend on the data. And we’re in a very good position right now to take our time, get more inflation data, get more data on the economy, on the labor market, before we have to make any decisions. So we’re in a strong position. But- if you just said there’s going to be one cut, which is what the median indicated, that would likely be toward the end of the year.

MARGARET BRENNAN: We have more to follow up on that, Neel, but I’m going to have to take a commercial break and ask you to stay with us through it and we’ll finish it on the other side. We’ll be right back. 

(ANNOUNCEMENTS)

MARGARET BRENNAN: And welcome back to “Face The Nation.” We return to our conversation now with Minneapolis Federal Reserve Bank president Neel Kashkari. Neel, we hear this frustration from consumers about high prices. But there are, for example, so many Americans traveling this weekend that the TSA says it’s the highest volume- second highest volume day they’ve seen all year. Credit card balances are going up. If Americans are under strain, they’re not really cutting back much. How is that challenging your decision making?

KASHKARI: It’s a great question, Margaret. There are a bunch of changes that have happened since the pandemic. For example, Americans are saving less money, a lower percentage of their income. How long is that going to endure? So we are looking at what I call a high pressure economy in some dimensions. But there’s also some evidence that it’s cooling. And we do know that the more well-to-do, the people that you talked about in your segment, they’re- tend to be spending more. On the other end of the distribution, we see people with lower credit scores, their delinquencies are rising. And so it’s not a all-good scenario by any stretch, but we are seeing some underlying resilience. But we also have to pay attention to those who are struggling to make ends meet.

MARGARET BRENNAN: The White House has this Council of Economic Advisers and put out a report saying that greater availability right now of dock workers and truck drivers accounted for 86% of the reduction of inflation since 2022. How much is the supply of workers affecting prices? And- and is this a sign that this high degree of immigration is really impacting inflation too?

KASHKARI: Well, there’s no question: the big inflation that we saw over the last few years, a lot of it was driven by disruptions in supply. There’s no- not enough workers, as well as supply chains getting disrupted. Many of those things have gotten a lot better. Workers have come back, as you just indicated, a lot of immigration, that’s helped fill a lot of the jobs that have been open. Those have, on the margin, helped to bring down inflation. Now the net effect of immigration long run, you know, obviously, immigrants, they work hard, they contribute to our economy, they also need a place to live, they also need a place to- they also eat. So they also have demand for services and goods. So what the net effect on inflation is over the long run is a little bit harder to judge. But I think right now, the fact that many Americans are coming back to work and taking jobs that need to be filled, that’s really helping our economy get back on track. And so we just have to finish the job. We’re at around- around the 3% inflation rate right now, we got to bring it all the way back down to our 2% target.

MARGARET BRENNAN: I know that the Fed is apolitical. But we’re in an election year and the economy and inflation are top of mind for a lot of people. You mentioned the impact on housing. Senate Democrats like Elizabeth Warren wrote a letter to Chair Powell about the housing shortage and urged him to cut interest rates because, she was arguing, higher borrowing costs are discouraging people from building new homes. On the other side of the political aisle- aisle, you have the Republican presidential candidate Donald Trump complaining about high mortgage rates and connecting it to migrants. Are you concerned here that elected officials are really politicizing the Fed?

KASHKARI: Well, I- you know, people criticize us all the time, the best thing we can do when the political winds blow is to focus on our dual mandate goals, that’s stable prices and maximum employment. You know, Chair Powell was asked the same question about housing in his press conference, and he was right to point out that we’ve had a shortage of housing for a decade or more. The best thing that the Federal Reserve can do is get inflation back down to target, and that will allow mortgage rates to go back down to normal levels. If we simply cut interest rates to try to support homeownership right now, that would probably push up the price of houses, and it actually wouldn’t lead to any better affordability. The best thing we can do is do our jobs, get inflation back down to our target, and then hopefully, the supply side of the economy will- can step in to build the homes that Americans need.

MARGARET BRENNAN: I wonder your thoughts on what Treasury Secretary Yellen has talked about with her plan to have the largest economies in the G7 give a loan to Ukraine using the interest from the accounts that Russia has overseas, $280 billion worth of frozen assets. She’s not touching those assets, but taking the interest. Do you have any concerns about that in terms of the impact on the banking system?

KASHKARI: I don’t have concerns about the stability of the banking system and what that would do to large global banks. I think that is really a policy call for the executive branch and their allies around the world to decide. Ultimately, the- the dollar is the responsibility of the U.S. Treasury Department. And understanding how people would view the dollar, you know, given these types of moves, that’s really for them to decide. From a banking stability perspective, I don’t see any financial stability concerns that come to mind for me.

MARGARET BRENNAN: Oh, that’s an interesting plan, and we’re going to track that. Neel, always good to have your insights. We’ll be right back.