Inflation is running too high across the US economy, according to Neel Kashkari, even when food and energy are excluded from the data. The Minneapolis Federal Reserve president said the problem now reaches well beyond oil prices and is evident across services and broader consumption.
Kashkari made the remarks during a 20 September appearance on Fox News' Sunday Morning Futures, days after the Federal Open Market Committee raised its federal funds target range by a quarter percentage point to 3.75%–4.00%. The decision was unanimous and marked the first rate increase since July 2023.
Kashkari voted for the increase. At the previous meeting in July, he had been one of three dissenters who favoured raising rates while the majority chose to leave them unchanged.
His comments point to the Fed's concern that price rises have become more deeply embedded than the headline energy figures alone suggest. Headline consumer price index inflation rose 3.4% over the 12 months through August, while energy prices increased 16.3%. Prices excluding food and energy rose 2.4% over the same period.
The Fed chairman, Kevin Warsh, estimated that inflation on the Fed's preferred personal consumption expenditures, or PCE, measure was roughly 3.6% in August. He said too many categories were still registering increases above 3% over both 6- and 12-month periods.
The central bank has raised its inflation forecasts and delayed its expected return to the 2% target until 2029. Updated FOMC projections put headline PCE inflation at 3.7% for the year and core PCE at 3.4%. Each forecast was 0.1 percentage point higher than in June.
Most participants in the committee expect further action. Sixteen of 18 FOMC participants projected at least one additional rate increase, while 17 of 18 judged inflation risks to be weighted to the upside. The FOMC is scheduled to meet next on 27–28 October.
Kashkari said the Fed has tools to bring inflation down, while adding that monetary policy needs support from other parts of government or the real economy. He did not set out what form that help should take.
He also acknowledged the limits of central-bank policy in dealing with geopolitical shocks, including Strait of Hormuz tensions that have affected oil supplies. Such disruptions can feed into energy costs, while the Fed's concern is increasingly centred on price growth across a wider set of goods and services.
Despite concerns over tariffs, trade war and conflicts in Ukraine and Iran, Kashkari described the US economy as resilient. He said growth had been running at a good clip and that productivity was showing some signs of improvement.
The immediate question for the Fed is whether higher borrowing costs can reduce the broader price pressures identified by Kashkari without undermining that resilience. The committee's latest forecasts and participants' interest-rate projections indicate that officials expect the inflation fight to continue.
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