Federal Reserve Bank of Minneapolis President Neel Kashkari said Wednesday night that inflation remains uncomfortably elevated, even after the latest personal consumption expenditures data showed a milder reading than economists had anticipated. Speaking in an exclusive conversation with CNBC's Steve Liesman, Kashkari struck a measured but still cautious tone, arguing that the progress on prices is encouraging but not sufficient to change the broader policy picture.
Kashkari's remarks arrive at a delicate moment for the Federal Reserve, which has spent the past two years trying to bring inflation back toward its 2% target without triggering a sharp downturn. The softer-than-expected PCE report offered some relief to markets that have been searching for evidence that price pressures are continuing to ease. But Kashkari's framing suggested that one benign data point is not enough to alter the Fed's underlying concern that inflation remains above where policymakers want it to be.
Inflation Still Above Target
Kashkari's central message was straightforward: the inflation fight is not over. By saying prices are "still too high," he reinforced the view that the Fed is likely to remain data-dependent and reluctant to signal an imminent shift toward easier policy. The PCE index is the central bank's preferred inflation gauge, and even when it comes in softer than expected, officials typically look for a broader pattern of moderation across multiple months before drawing firmer conclusions.
That caution matters because markets have repeatedly tried to front-run the Fed's next move. Traders have been eager to price in rate cuts whenever inflation data cools, but policymakers have consistently pushed back against the idea that a single report can settle the question. Kashkari's comments fit that pattern. They suggest the Fed is still more focused on the durability of disinflation than on any one monthly surprise.
The remarks also reflect the central bank's broader challenge: inflation has come down substantially from its peak, but progress has been uneven. Services inflation and housing-related components have remained sticky at times, and officials have worried that premature easing could allow price pressures to reaccelerate. Kashkari's language indicated that the Fed is not yet comfortable declaring the inflation problem solved.
Labor Market Holds Up
At the same time, Kashkari described the labor market as "pretty good," a notable assessment because it implies the economy is still showing resilience despite higher interest rates. For the Fed, that combination is important. A solid labor market gives policymakers more room to stay patient on inflation, because it reduces the immediate pressure to cut rates in response to weakening growth or rising unemployment.
The labor market has been one of the key reasons the U.S. economy has avoided a sharper slowdown. Hiring has cooled from the breakneck pace seen in the post-pandemic rebound, but employment conditions have remained broadly stable. Kashkari's comments suggest he sees that stability as evidence that the economy can tolerate restrictive policy for longer if needed.
That does not mean the Fed is indifferent to employment risks. Rather, it means officials are weighing two objectives at once: ensuring inflation continues to fall while avoiding unnecessary damage to the job market. Kashkari's assessment implies that, for now, the balance of risks still allows the central bank to keep a watchful stance rather than rush toward rate cuts.
Policy Patience Ahead
The interview is likely to be read by investors as another sign that Fed officials are in no hurry to pivot. Kashkari is not among the most hawkish voices on the Federal Open Market Committee, but his comments nonetheless reinforce a broader message from the central bank: progress on inflation is welcome, yet not decisive enough to justify complacency.
For markets, that means the path ahead remains highly sensitive to incoming data on prices, wages and employment. A softer PCE print may ease some immediate pressure on Treasury yields and equities, but Kashkari's remarks serve as a reminder that policymakers will want to see a sustained trend before changing course.
The Fed's challenge is now one of calibration. If it keeps rates elevated for too long, it risks slowing the economy more than necessary. If it moves too soon, it risks losing the inflation gains already achieved. Kashkari's comments suggest that, in his view, the greater danger still lies in moving before inflation is firmly under control.
For now, the message from Minneapolis is clear: the labor market remains healthy, inflation has improved, but it is not yet low enough for comfort. That leaves the Fed in a holding pattern, watching the data and resisting pressure to declare the battle won.