Kashkari warns inflation still too high

Minneapolis Federal Reserve President Neel Kashkari said on Sept. 20 that inflation remains too high across the U.S. economy. He described price pressures as widespread, emphasizing that they extend beyond the recent increase in oil prices. Speaking in a televised interview, he stated that Americans are feeling inflation "much beyond just oil prices" and that it is present "in all aspects of the economy," including the services sector.

Kashkari highlighted that even after stripping out volatile components such as energy and food, underlying inflation remains elevated. This focus on so-called core inflation underlined his view that the problem is not confined to a few categories but reflects broad demand and price dynamics. His comments pointed to persistent inflationary pressure that continues to affect households and businesses across multiple sectors.

Kashkari reiterated that the Federal Reserve’s responsibility is to return inflation to its 2% target. He framed this goal as central to the Fed’s policy decisions and stressed that officials are monitoring the breadth and persistence of inflation in setting interest rates. The recent data on services and broad-based price increases were presented as reasons for continued vigilance.

He supported last week’s unanimous decision by the Federal Open Market Committee to raise the federal funds rate by 25 basis points to a target range of 3.75%–4.00%. The report noted that at the prior meeting, when the committee chose to leave rates unchanged, Kashkari had been among three officials who dissented in favor of a hike. This shift to a unanimous vote underscored greater alignment among policymakers on the need for tighter monetary conditions in light of ongoing inflation.

While addressing the impact of rising crude prices, Kashkari underlined that there are clear limits to what interest rate policy can achieve. He stated that there is nothing the Fed can do with rates to reopen the Strait of Hormuz or directly bring oil prices down. These comments acknowledged that some of the recent upward pressure on prices is tied to supply disruptions rather than domestic demand alone.

The latest rise in oil prices has been linked to escalating hostilities in the Middle East, including reported attacks in the Strait of Hormuz and the closure of Saudi Arabia’s East-West pipeline. Kashkari cited these developments as examples of external shocks that contribute to higher energy costs. He contrasted these supply-driven factors with the Fed’s tools, which influence demand conditions but cannot resolve geopolitical or logistical constraints.

Kashkari’s remarks together signaled concern that inflation pressures are both broad and persistent, even as new energy shocks add to headline price levels. His backing of the latest rate increase, following an earlier push for tighter policy, reflected an emphasis on ensuring that inflation moves back toward the 2% objective. The combination of domestic price dynamics and international supply disruptions leaves the Fed balancing its mandate against factors outside its direct control.