Fed's Kashkari Says Inflation Still 'Too High' But Moving Right Way, Warns Of Another Tariff-Related 'Price Bump'

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, voiced optimism about the U.S. economy, forecasting sustained growth and easing inflation.

During a virtual town hall with the Wisconsin Bankers Association on Wednesday, Kashkari acknowledged that while inflation is still “too high,”?it is moving in the?right direction.?The central banker was particularly confident about a decrease in inflation within housing-related sectors.

The question is, is it going to be two and a half percent by the end of the year, something short of that, or something above that? I don't know,” said the Minneapolis Fed president. He emphasized the Fed’s commitment to its 2% inflation target and does not anticipate a resurgence in inflation. 

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On tariffs, Kashkari noted that their effect on consumer prices has been smaller than expected. He warned, however, that "another price bump related to tariffs could happen," emphasizing that the long-term consequences of tariffs are still developing.

He said the overall economy is “quite resilient,” noting that it “has not slowed as much as expected.” He also described the current economy as “K-shaped,” highlighting that the recovery is uneven across various sectors.

December Inflation Steady, ‘Super Core’ Cools

Kashkari’s comments come in the wake of the December inflation report, which showed prices holding steady. While core services inflation excluding housing, known as "super core", softened to 2.76% from previous highs, the monthly rate remains "a bit too hot," according to Jeffrey Roach, Chief Economist for LPL Financial.

The central bank is expected to stand firm, with prominent strategist Charlie Bilello warning against political interference in monetary policy.

Meanwhile, Director of the National Economic Council Kevin Hassett defended the strength of the U.S. economy under President Donald Trump, saying that it was thriving despite the Federal Reserve's tight monetary policy.

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