Minneapolis Federal Reserve President Neel Kashkari said Friday that recent market trends show investors are moving away from the U.S. as the safest place to invest while President\u00a0Donald Trump\u2019s trade war escalates.<\/p>\n\n\n\n
With Treasury yields rising and the U.S. dollar sagging against its global counterparts in recent days, the trends are running counter to what you might normally see, the central bank official said during a CNBC\u00a0\u201cSquawk Box\u201d interview.<\/p>\n\n\n\n
\u201cNormally, when you see big tariff increases, I would have expected the dollar to go up. The fact that the dollar is going down at the same time, I think, lends some more credibility to the story of investor preferences shifting,\u201d Kashkari said.<\/p>\n\n\n\n
The 10-year\u00a0Treasury yield has surged this week\u00a0after Trump announced his intention to slap a 10% across-the-board tariff against U.S. trading partners and threatened to impose even harsher select levies before backing down Wednesday.<\/p>\n\n\n\n
At the same time,\u00a0the greenback\u00a0has slumped more than 3% against a basket of global currencies, with moves potentially signifying a turn away from safe-haven U.S. assets.<\/p>\n\n\n\n
\u201cInvestors around the world have viewed America as the best place to invest, and if that\u2019s true, we will have a trade deficit. So now one of the ways that expresses itself is in lower yields across asset classes in America,\u201d Kashkari said. \u201cIf the trade deficit is going to go down, it could be that investors are saying, OK, America no longer is the most attractive place in the world to invest, and then you would expect to see bond yields go up.\u201d<\/p>\n\n\n\n
Kashkari noted, however, that he is seeing \u201cstresses\u201d but not significant dislocations in market functioning.<\/p>\n\n\n\n
Kashkari does not vote this year on the rate-setting Federal Open Market Committee but will vote in 2026. He noted that his focus in the current environment is on keeping inflation expectations anchored, echoing other policymakers\u2019 statements that rates are unlikely to move until there is clearer visibility on fiscal and trade policy.<\/p>\n\n\n\n
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