Fed's Kashkari Backs Rate Hikes, Citing Persistent 3% Inflation and Higher Neutral Rate

Minneapolis Federal Reserve President Neel Kashkari maintains a hawkish policy stance, stating that softer Core Personal Consumption Expenditures data does not change the narrative of persistently high inflation. Kashkari highlighted that underlying inflation remains around 3.0%, staying above the Federal Reserve's target for over five years. Supported by economic resilience, solid consumer spending, and the labor market, Kashkari raised his neutral policy rate estimate to 3.25%, driven partly by artificial intelligence investments. He previously penciled in one rate hike this year and another in 2027, warning further tightening may be needed.