What's next for US monetary policy? Kashkari: There is a debate within the US Fed, and I belong to the "wait and see" faction.

On Tuesday this week, the two-day annual central bank conference, hosted by the Bank of Japan and its affiliated think tank, commenced at the Bank of Japan's headquarters in Tokyo.

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis in the US, stated at the conference that, in the face of inflation risks stemming from Trump's tariff policies, there are differing views within the US Fed on how interest rates should change.

Kashkari said he personally prefers to temporarily maintain stable interest rates until the impact of tariff hikes on inflation becomes clearer. He also warned against overlooking the impact of Trump's tariffs on global supply price shocks.

A debate is underway within the US Fed.

Kashkari noted that the global economic shocks from Trump's across-the-board tariff impositions, along with the uncertainty surrounding US trade policies, are compelling central banks worldwide to seriously consider whether they should prioritize combating inflation or supporting economic activity.

He stated thata "healthy debate" is currently taking place within the US Fed: some Fed officials are calling for the impact of tariffs to be viewed as a temporary inflationary shock, and thus, priority should be given to supporting economic growth through interest rate cuts.

Others, however, oppose this perspective on tariff-induced inflation, arguing that US trade negotiations are unlikely to be resolved soon, and their medium and long-term impacts may remain unclear. Therefore, a more cautious approach should be taken with monetary policy tools—a stance he aligns himself with.

He said, "The (trade) negotiations may takeseveral months or even yearsto fully conclude. As the US and its trading partners take reciprocal responsive measures, there may be a tit-for-tat escalation of tariffs."

He added that the full impact of tariffs on intermediate goods would take some time to filter through to final prices.

Kashkari expressed concern about how long long-term inflation expectations could avoid becoming unanchored, given that the US inflation rate has far exceeded the Fed's 2% target for four years.

"These arguments support maintaining the stance of policy rates—currently possibly moderately restrictive—until the path of tariffs and their impact on prices and economic activity become clearer," Kashkari said. "Personally, I find these arguments more compelling because I place great importance on safeguarding long-term inflation expectations."

Since last December, the US Fed has kept its policy rate unchanged at 4.25%-4.50%. After Trump took office in January this year, as officials found it increasingly difficult to estimate the impact of Trump's policies, particularly his tariff policies, the path forward for the US Fed's monetary policy also seemed increasingly shrouded in uncertainty.