Minneapolis Federal Reserve President Neel Kashkari says two factors are holding the U.S. economy back right now: President Trump’s trade war and high interest rates.

The current U.S. interest rate is a bit below 2 percent after the Fed lowered it slightly last week. Kashkari would like to see the rate cut to under 1.5 percent to stimulate the economy.

“I’m concerned that we’ve needlessly raised interest rates over the past three years and put the economy into a more dangerous position that makes it more vulnerable to shocks that could hit us,” Kashkari told The Washington Post in an interview Tuesday. “Why are we trying to contract the economy?”

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Kashkari said he pushed for a bigger interest rate cut when the Fed’s policy-setting committee met last week and that he will continue to advocate for a sizable reduction later this year. He will be one of the 10 Fed leaders who get to vote on the appropriate level of interest rates in 2020.

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Trump has blasted the Fed as having “no ‘guts,’ no sense, no vision,” saying it is keeping interest rates too high. He has suggested the central bank should lower rates back to zero, where they were for many years after the 2008 financial crisis. Kashkari, a Republican, said politics play no role in his advocacy for lower rates and that he is advocating only for “modestly” lower rates.

“I could easily see justifying 50 basis points lower than it is today,” said Kashkari, who has been advocating for lower rates since early 2016, before Trump won the election. But he added, “I hope we don’t end up back at zero.”

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U.S. consumers are holding up the economy right now, but there are signs of trouble. Consumer confidence fell more than expected in September as Americans started to balk at the continuing trade war, the Conference Board reported Tuesday.

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Kashkari is concerned that hiring is slowing this year and that the yield curve inverted in August and is close to doing it again, a situation that has occurred before recessions. He said the Fed has to act before companies stop hiring altogether or begin mass layoffs.

“Monetary policy is a little bit science, but it’s also mass psychology,” he said. “Right now one concern I have is the job market does appear to be slowing. It has stepped down pretty markedly from a year or two ago.”

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Trump and his team have placed the blame for the slowing economy and weaker hiring squarely on the Fed, but Kashkari said trade policies are clearly playing a role, along with an aging U.S. population and trouble in the global economy.

Kashkari called the trade war the “big elephant out there,” one he hears about all the time from farmers, manufacturers and exporters, some of whom tell him they are so nervous about the trade situation that they are not investing or hiring. The Minneapolis Fed region comprises Minnesota, Montana, North Dakota, South Dakota and parts of Michigan and Wisconsin, states that are desperate to sell soybeans to China again and see manufacturing get out of a recession.

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“I see a growing risk,” Kashkari said. “… It’s so hard for me to predict whether any kind of a deal will be reached. And will the deal be a real deal or will it be something in name only? I don’t know. It continues to be a big uncertainty.”

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Most Fed leaders are hesitant to lower interest rates as much as Kashkari wants. They think the economy is still solid and does not need much stimulus from the central bank. Some have even argued that no additional cuts are needed until there are clear signs of strain in the economy. But Kashkari says if the Fed waits until the economy is clearly in trouble, it will be too late.

“If we’re really sure the economy is slowing and that we’re heading into a recession, it’s too late. We will hit a recession,” he said, echoing similar remarks last week by Fed Chair Jerome H. Powell.

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Powell said he prefers to act sooner rather than later, since interest rates are low by historical standards and the Fed doesn’t have much room to cut when trouble hits. But Powell has been reluctant to commit to additional rate cuts given how divided the Fed’s policy-setting committee is.

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The other big fear on Wall Street lately is that banks had a high demand last week for overnight loans from the Fed. Banks have not had this much demand for extra reserves since the financial crisis. Kashkari played a large role in addressing the 2008 financial crisis, including administering the Troubled Asset Relief Program (TARP), which bought toxic assets to help ensure that banks survived.

Kashkari says banks should be required to hold more capital — double what they are required to hold now — but he does not see the recent issues in the overnight lending market as a big problem.

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“I don’t see it as a financial stability concern,” he said. Instead, he said, “it probably means we may have to start expanding the balance sheet sooner than we otherwise thought.”

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Some on Wall Street have argued for a return of quantitative easing — where the Fed would buy assets to pump more money into the financial system. Kashkari says what’s needed right now isn’t QE but rather a little more liquidity to ensure the plumbing of financial markets works.

Taylor Telford, Thomas Heath and David J. Lynch contributed to this report.

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