Neel Kashkari 'Nervous' About Big Layoffs, Fed President Warns America Could Lose Status As 'Premier Destination For Capital'

Minneapolis Federal Reserve President Neel Kashkari says the biggest gift the U.S. economy could receive this year is clarity on trade. Instead, corporate boardrooms remain spooked by Washington's tariff volleys, and that has the central banker "nervous" about a wave of future layoffs.

What Happened: Speaking at the University of Minnesota on Thursday, Kashkari said executives he meets aren't cutting staff yet but are starting to plan for that possibility if uncertainty drags on. "The thing about confidence is if we all get nervous at the same time, it can really slow the economy down," he warned, reported Reuters.

Kashkari argued the long-running U.S. trade deficit has actually kept interest rates in check because global investors park money here, according to a separate report by Seeking Alpha. Flip that to a sustained surplus, he said, and America could lose its status as the "premier destination for capital," driving borrowing costs higher and pushing up the Fed's so-called neutral rate or the level where policy neither speeds nor brakes growth.

For now, the Minneapolis Fed chief sees President Donald Trump's tariff brinkmanship as the main source of turmoil. The longer businesses hold off on investment and hiring, he cautioned, the greater the risk that contingency plans turn into pink slips.

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"We haven't seen it yet," Kashkari said of large-scale job cuts, but he does concede that it is a topic he has a close eye on at the moment.

Why It Matters: Kashkari’s comment arrives as Trump’s attacks on the Fed continue to drive chatter among economists. Harvard economist Kenneth Rogoff warns the Federal Reserve's autonomy is far more fragile than the public assumes, noting it is neither constitutionally enshrined nor historically entrenched. He argues that Congress could "restructure or even dissolve" the institution "in a week." Losing that shield, he said, risks a 1970s-style return to price controls and financial repression.

Rogoff cited Trump's clashes with Chair Jerome Powell — and progressive calls for "helicopter money" — as evidence that threats come from both right and left. Market analysts share his concern: some warn Trump's jabs could trigger a flight from U.S. assets, while economist Nouriel Roubini says pressuring the Fed to cut rates would be "repeated own goals," pushing bond yields higher and unmooring inflation expectations amid tariff-driven price pressures.

Photo: chayanuphol/shutterstock

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