Fed official speaks at event hosted by Elevate Rapid City

A national leader in monetary policy said during a visit to South Dakota that the Federal Reserve was "making good progress" bringing down inflation until "tariffs threw a curveball at us."

Neel Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis, addressed dozens of people during a question-and-answer session Thursday at the Hyatt Place in downtown Rapid City. Local economic development group Elevate Rapid City hosted the event.

A tariff is a tax on imported goods. Kashkari said the duration and severity of tariff-caused price increases is still unknown.

"The impact of tariffs on the economy is taking longer to be felt than I would have guessed when they were announced," he said.

That's partly because some businesses have used their inventories to avoid buying imported goods, which has allowed them to avoid passing the cost of tariffs on to their customers.

"But as that inventory gets worked down, they have to replenish it," Kashkari said. "They're telling us, 'Hey, at the beginning of the year, we might start to see more of a tariff impact on prices.'"

Effects on farmers

Farmers are already feeling the effects of higher tariffs. Responding to a question about China's retaliatory boycott of U.S. soybean purchases, Kashkari said the situation is changing the global marketplace.

"What's happening is you're seeing other countries respond by growing more beans," he said. "And so more supply is coming online, and that is going to have a permanent effect on the price of soybeans, and it really disrupts our markets."

He added that "when our whole supply lines are set up to ship to China, it's not so easy to now turn it around and ship it someplace else."

Yet he said there's little the Fed can do for affected farmers: "All we can do is try to keep inflation in check, and it really is a question for our elected leaders and for fiscal policy to try to address."

Interest rates

Kashkari is a member of the Federal Open Market Committee, which sets the target for the influential federal funds interest rate. The Fed has kept the rate higher in recent years while trying to bring inflation down to 2% over the long term.