Kashkari Sounds Alarm: Fed Official Warns Inflation Still Too High Despite Cooling Signals

Federal Reserve Bank of Minneapolis President Neel Kashkari has cautioned that U.S. inflation remains uncomfortably high, despite early signs of moderation across some parts of the economy. Speaking at the Opportunity & Inclusive Growth Institute’s Research Conference on Thursday, Kashkari said that while price pressures have eased compared with the peaks of the past two years, inflation hovering around 3% is still above the Federal Reserve’s long-term target of 2%.

His remarks underscore the delicate balance the central bank faces as it navigates a complex economic landscape. The U.S. economy continues to show resilience, supported by steady consumer spending and a strong job market, yet policymakers remain wary of declaring victory over inflation too soon. Kashkari emphasized that while headline inflation has slowed, the progress has been uneven, with persistent strength in services and shelter costs offsetting declines in goods prices.

“The data show some encouraging movement, but we are not where we need to be yet,” Kashkari noted. “Inflation remains too high, and we have to make sure that we don’t ease policy prematurely.”

The Federal Reserve has held interest rates at their highest level in over two decades, aiming to curb demand and cool price growth. Investors had been hoping that the end of the recent U.S. government shutdown and signs of slowing inflation might prompt the Fed to begin cutting rates early next year. However, Kashkari’s comments suggest that policymakers may prefer to wait for clearer evidence that inflation is on a sustainable downward path before adjusting their stance.

Economists point out that while goods inflation has softened due to declining energy prices and selective retail discounting, services inflation — particularly in housing, healthcare, and insurance — remains sticky. This divergence has complicated the Fed’s task, as the broader economy continues to send mixed signals. Some industries report hiring slowdowns and softer demand, while others, especially technology and travel, remain robust.

Recent analyses have also highlighted the growing role of alternative data sources — including online price tracking, freight trends, and inventory movements — in gauging inflation pressures. These tools have become increasingly important during periods when official government data releases were delayed or incomplete. The insights they provide paint a nuanced picture: price moderation in some sectors, coupled with stubborn inflation in others, suggesting that the fight against rising costs is not yet over.

Currency markets reacted cautiously to Kashkari’s remarks. The U.S. dollar weakened slightly against the euro and the British pound but remained firm against the Japanese yen, reflecting a broader sense of investor uncertainty. Market participants are now looking ahead to key upcoming economic reports — including employment figures and the Consumer Price Index (CPI) for November — which could influence expectations for the Fed’s next policy meeting.

Financial analysts interpret Kashkari’s tone as a signal that the Federal Reserve is in no rush to shift toward rate cuts. Instead, the central bank may choose to maintain its current restrictive policy for longer, ensuring that inflation expectations remain anchored. For businesses and consumers alike, that could mean a prolonged period of higher borrowing costs, even as the broader economy continues to adjust to the post-pandemic reality.

In the coming months, the challenge for the Fed will be to preserve economic momentum while ensuring that inflation does not rebound. Kashkari and his colleagues will face mounting pressure to balance those twin objectives amid global uncertainties, ranging from supply chain realignments to geopolitical tensions.

As the U.S. economy transitions into 2026, the message from Kashkari is clear: progress has been made, but the job is far from done. The Federal Reserve remains on alert — determined to restore price stability without derailing the hard-earned recovery that followed years of pandemic disruptions and financial turbulence.