Minneapolis Fed President Neel Kashkari said inflation remains too high near 3%, even after a softer-than-expected August inflation print, and repeated that he expects one more rate hike this year and a second in 2027. He also said the Fed's neutral interest rate may sit higher than officials have assumed.
Minneapolis Federal Reserve President Neel Kashkari said Wednesday that inflation is still too high, even after the Fed's preferred inflation gauge came in softer than forecast. According to CNBC: "Inflation is still too high", Kashkari told the network in an interview at a Council on Foreign Relations event in New York.
The remarks followed Wednesday's release of the August core personal consumption expenditures index, which rose 3% on an annual basis and came in below economists' forecasts. Kashkari said the data had not changed his view, adding that price growth has stayed elevated for more than five years.
One more hike this year, another in 2027
Kashkari has pencilled in one more interest rate hike this year and a second in 2027. He also described the economy as resilient, saying consumers keep spending and people who want to work are finding jobs. He said he is skeptical that the economy is struggling outside the artificial intelligence sector.
Neutral rate may already sit higher than assumed
Kashkari said the longer the economy stays strong, the more he questions how tight monetary policy really is. He added that the neutral rate, the level that neither stimulates nor restrains growth, may be higher than previously thought and is likely elevated for now. If the neutral rate is higher, today's policy could be less restrictive than it appears, which can strengthen the case for further tightening.
He added that policymakers should not blindly follow markets but should not dismiss the message markets send either.
Fed's first hike in three years leaves the door open
The Fed raised rates this month for the first time in three years and signaled another increase could follow. Kashkari's comments reflect his own view rather than a committee decision, so the pace of further moves still hinges on incoming inflation and employment data.
Sources: Investinglive, CNBC
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