The Federal Reserve recently surveyed South Dakotans to get their perspectives on monetary policy to bring to the Federal Open Market Committee in Washington DC.
The Federal Open Market Committee sets the target for the federal funds interest rates, with the goal of a 2% inflation rate long-term.
Neel Kashkari is the President and CEO of the Ninth District Federal Reserve in Minneapolis. He’s also on the Federal Open Market Committee and spoke at an Elevate Rapid City Town Hall. He said the fed was making progress towards its 2% inflation goal until early this year.
“Tariffs threw a curveball at us,” Kashkari said.
He said part of the problem is that the cost of goods goes up, but how high…how long prices go up…and if it spreads to other areas of the economy aside from goods are also major factors.
“The short answer is so far, it’s too soon to know for sure,” Kashkari said.
That’s because they don’t know if the increased prices from tariffs are going to “level off” and bring inflation down with them. He says they’re taking longer to take effect because businesses stocked up on goods ahead of the Trump administration.
“And so, they’ve been working that inventory down, not having to pass all the cost onto their customers,” Kashkari said. “But as that inventory gets worked down and they have to replenish it, they’re telling us, ‘Hey at the beginning of the year we might start to see more of a tariff effect on prices.’ So, we’ll see.”
He said that’s while the US job market appears to be slowing down. Kashkari said while that’s a trend most of the country is feeling pain from, here in South Dakota inflation is the bigger worry.
“What I’m hearing here in Rapid City is that overall, the economy seems like it’s doing pretty well. Most folks have said that they’re more concerned about inflation, that they’re concerned that inflation is a problem going forward and that businesses are finding it somewhat easier to find the workers that they need," Kashkari said. "But it’s still, it’s still a challenge for businesses. South Dakota, I know this having been here now for 10 years, South Dakota always has a tight labor market.”
The next Federal Open Market Committee meeting is set for Oct. 28 and 29.
