Minneapolis Federal Reserve President Neel Kashkari has declared that tackling inflation remains his primary focus, even as the labour market holds relatively steady.
Kashkari made the comments while speaking to CNBC’s Kaori Enjoji at the Bank of Japan-IMES Conference, where he outlined the Fed’s current thinking on monetary policy.
He acknowledged the central bank’s dual mandate of price stability and full employment, saying the Fed would continue taking a “balanced approach” to both objectives.
Despite that balance, Kashkari was clear that inflation demanded the greater share of attention given that consumer prices remain well above acceptable levels.
“I am focusing heavily on inflation. I’m not ignoring at all the labor market. We need to pay attention to both sides, but the labor market is in decent shape right now, while inflation is simply much too high,” he said.
Kashkari noted that inflation has remained above the Federal Reserve’s 2% target for more than five years, a period he described as deeply concerning for the broader economy.
He warned that the longer inflation stays elevated, the higher the risk that consumer expectations about future prices become unanchored and begin drifting upward.
“If that were to happen, then we’d have to respond even more aggressively, so we’re much better off doing what we need to do to keep inflation expectations anchored,” Kashkari added.
US headline inflation most recently stood at 3.8% in April, while core CPI, which excludes food and energy, increased 0.4% and 2.8% respectively.
Kashkari identified several global factors driving current inflationary pressures, including the Covid-19 pandemic, tariffs, the war in Ukraine, and the conflict in Iran.
When asked specifically about the drivers behind the most recent surge in prices, Kashkari pointed to energy and fertilizer costs as the primary culprits behind the current spike.
He acknowledged there was “some tailwind from what was left over before,” suggesting earlier inflationary forces had not entirely dissipated before new pressures emerged.
“Those inputs do affect other categories as well, and so one of the things I’m going to be looking for is, when do we see energy prices affecting the broader economy and inflation in the broader economy,” he said.
Kashkari’s comments reinforce the view that the Federal Reserve is unlikely to ease its vigilance on price stability in the near term, despite a labour market he described as being in “decent shape.”