Minneapolis Fed CEO on national debt, Iran impacting high inflation and more
WASHINGTON (CBS, KYMA) - Neel Kashkari, President & CEO Minneapolis Fed, spoke with Margaret Brennan on Face the Nation Sunday about the national debt reaching $40 trillion.
Brennan brought up her previous interview with Kashkari back in May, which he said he didn't see an immediate crisis brewing, but said it was going to be a problem.
When asked if the U.S. is at a point where this is a problem, Kashkari said:
"If you look at the Treasury yields, yields are high, 4.7% for example, on the 10-year Treasury. They're high relative to recent history. They're not high relative to more longer American history. In the early 2000s, the 10-year Treasury and the 30-year Treasury were around these levels. In the 90s, they were meaningfully higher than they are now, and there's no sign of Treasury market dysfunction or breaking down in financial markets. There are a lot of different factors that go into those Treasury yields. Inflation, and the outlook for inflation is one of those factors, that's the Fed's job. But there are many other factors, like, it's the AI investment, government borrowing, economic growth. All of those end up going together to set these long-run Treasury yields."
Brennan then brought up Treasury Secretary Scott Bessent's comments saying it was due to traders having bad information, prompting her to ask Kashkari if that's what's happening, to which he said:
"I'm going to leave it to the Treasury Secretary to manage the Treasury debt market. That's the job of the Treasury Department. The Fed's job is really to take care of the inflation piece of it. We are all absolutely committed to getting inflation back down to 2%, but long run, it's going to be fundamentals of debt issuance, of investment, of economic growth and productivity. Long run, that's what sets the Treasury yields, and not just in the U.S. but government bond yields all around the world."
During the interview, Brennan and Kashkari talked about what Americans should be listening for to know that the national debt is being dealt with.
"I just think you can look to the Congressional Budget Office, which makes forecasts of debt, US debt and deficits for decades out into the future, and many Fed leaders have said for a long time. That the debt trajectory is on an unsustainable path. I think ultimately it's up to our fiscal actors, that's the Treasury and the executive branch working with Congress to design a fiscal package that can change that and put it on a sustainable path. But obviously you know you said it a moment ago that's not the Fed's role. The Fed's role is to take whatever they decide to do, put that into our forecast of the economy, and then our job is to take that and get inflation back down to our 2% target. Achieve our dual mandate goals and my colleagues and I are all committed to doing so."
Neel Kashkari, President & CEO Minneapolis Fed
Later in the interview, Brennan and Kashkari talked about different factors contributing to high inflation such as the ongoing conflict with Iran.
"The longer it goes on, the bigger effect it ends up having on the US economy and on inflation. And even if it's driven by geopolitical factors like that, ultimately it does affect inflation. Ultimately it does have a bearing on the Federal Reserve's mandate. And so the longer that goes on, the less confident I am that inflation is going to return to target. For five years, we've been saying inflation is going to return to target in the next one or two years. It just keeps getting pushed out. Eventually we're going to have to do more. I'm not sure if we're there yet. We need to see more data, but I don't want to prejudge. The next meeting, but I'm not feeling confident right now that inflation is heading back down to target in a short period of time."
Neel Kashkari, President & CEO Minneapolis Fed
They also talked about the trade tension between the U.S. and Canada.
"Canada is an important trading partner for America. We talked about the five years of elevated inflation that has largely been driven by what we call supply shocks. One of those supply shocks is the trade and tariff conflicts. And so to the extent that we can get to a new normal, a level of whatever the trade dynamic is going to be. Once we can get to that steady state, then businesses can adjust and the inflationary impact can fade into the background. 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 in inflation end up being extended and delayed. And so that's another factor to pay close attention to."
Neel Kashkari, President & CEO Minneapolis Fed
To watch more of Brennan's interview with Kashkari, click here.
