Federal Reserve Bank of Minneapolis President Neel Kashkari said on CNBC’s “Squawk Box” that the central bank is closely watching financial markets for signals on inflation expectations and investor confidence in the U.S., amid rising bond yields and a weakening dollar.
Kashkari said it is “hard to get a read of what’s happening underneath,” noting that recent market moves reflect both economic uncertainty and shifting investor sentiment toward the U.S. as a global investment destination.
The Federal Reserve official acknowledged a potential uptick in short-term inflation expectations and said the central bank’s priority remains preventing those near-term concerns from embedding into the longer-term economic outlook.
“I’m paying attention to the same market moves you all are,” he said. “The bond market, I’m paying particular attention to to try and understand what is it telling us about the underlying inflationary dynamics. And it’s a complicated thing to analyze.”
Dollar declines raise questions amid trade tensions
Kashkari also addressed the recent weakening of the U.S. dollar, which has surprised some analysts given the usual “flight to safety” pattern during periods of global economic stress. He noted that a declining dollar, combined with elevated bond yields, may signal waning confidence in U.S. assets.
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“If investors decide, ‘hey, we want to invest elsewhere,’ all else equal, that ought to be pushing up yields,” he said. “And you’d see that in what we call the term premium.”
Kashkari said part of the recent market volatility could stem from leveraged positions, including hedge funds liquidating assets amid equity declines. But broader trends suggest the U.S. may no longer be seen as the default investment destination it once was.
“I always go back to fundamentals,” Kashkari said. “Why do we have a trade deficit in America? It’s because investors around the world have viewed America as the best place to invest. If that changes, the whole equation changes.”
What it means for crypto markets
A weakening dollar and sustained inflation uncertainty would in theory renew interest in Bitcoin (BTC) and other cryptocurrencies as alternative stores of value.
Historically, crypto has benefited during periods of fiat currency devaluation or when confidence in traditional financial systems wavers. If investors continue to view the U.S. economy as less attractive, digital assets may gain from capital flows seeking diversified, decentralized exposure.
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