Kashkari strongly supports Powell: advocates for maintaining interest rates unchanged in January, firmly opposes administrative intervention in monetary policy

Minneapolis Federal Reserve President Neel T. Kashkari clearly expressed support for Federal Reserve Chairman Jerome Powell in an interview, directly pointing out that the recent actions of the Trump administration against the Federal Reserve are essentially an intervention "about monetary policy."

At the same time, regarding the upcoming interest rate meeting this month, Kashkari issued a clear hawkish signal, believing that there is currently no reason to adjust interest rates and that rates should remain unchanged in January.

Previously, the Department of Justice issued a grand jury subpoena to the Federal Reserve on Friday, leading to a public escalation of tensions between the two sides. Powell recently countered, stating that the government is using the excuse of renovation costs at the Federal Reserve headquarters to conduct a criminal investigation, with the real aim of pressuring the Fed to cut interest rates. This incident has triggered strong reactions from global policymakers and lawmakers from both parties in the U.S., with markets concerned that political interference will undermine financial stability.

Kashkari's statement reflects a collective resistance within the Federal Reserve to administrative interference. He pointed out that bipartisan support for Powell from lawmakers provides a buffer for the market, mitigating the impact of the investigation. Meanwhile, the Supreme Court is set to hold hearings on the case of Federal Reserve Governor Lisa D. Cook's dismissal, which will determine whether the president has the power to arbitrarily replace central bank officials, directly affecting the legal status of the Federal Reserve. As a voting member of the Federal Open Market Committee (FOMC) this year, Kashkari's remarks indicate that the Federal Reserve will adhere to a data-driven decision-making path rather than one influenced by political pressure.

Policy Game Under Political Pressure

The independence of the Federal Reserve is facing legal challenges. Next Wednesday, the Supreme Court will debate the president's control over central bank officials. Previously, Trump attempted to dismiss Federal Reserve Governor Lisa D. Cook on the grounds of mortgage fraud allegations.

According to the Federal Reserve Act, the president can only dismiss officials for "just cause," such as incompetence or misconduct. Kashkari warned that if the Supreme Court rules in favor of Trump, allowing the president to arbitrarily replace officials, it would undermine the fundamental elements of the Federal Reserve's independence. He also noted that the Supreme Court's statements over the past year seem to indicate a tendency to treat the Federal Reserve differently from other independent agencies.

In the interview, Kashkari pointed out that the Trump administration's attacks on the Federal Reserve over the past year "are actually about monetary policy." He believes Powell's characterization of the nature of this criminal investigation is accurate, namely that the government is using administrative means as leverage to force the central bank to lower borrowing costs.

Despite the increasing administrative pressure, Kashkari believes this is an opportunity to clarify the importance of the Federal Reserve's independence to the public. He mentioned that the current market performance is relatively calm, partly because bipartisan lawmakers have expressed support for Powell, sending a signal that the Federal Reserve should be free from political interference in setting interest rates.

Maintain Interest Rates in January, Cautious About Future Rate Cuts

On the monetary policy front, Kashkari clearly opposes cutting interest rates at the January meeting. After three rate cuts last year, the current benchmark rate remains between 3.5% and 3.75%. He believes that, given the resilient state of the economy, the current level of interest rates is appropriate Kashkari pointed out that although corporate hiring has slowed, there have not been large-scale layoffs. He specifically expressed concerns about inflation remaining above the 2% target for a long time and expects that the tariff policies of the Trump administration will continue to drive up prices. He stated, inflation may remain above the target for the next two to three years, and if this situation persists for seven or eight years, it will be very concerning. However, if the unemployment rate jumps, especially accompanied by a relief in inflation, Kashkari will change his strategy. Last December, the unemployment rate fell to 4.4%.

As Powell's term is set to expire in May, Trump stated he would select a successor who supports significant interest rate cuts (to around 1%). This premise has raised market doubts about the credibility of the next chairman.

In response, Kashkari emphasized that the most important credibility of the new chairman is built within the FOMC committee. He pointed out that the chairman only has one vote and must rely on data analysis and logic to persuade other committee members. Regardless of who the chairman is, they must win votes through arguments rather than executing external political directives