Persistent U.S. Inflation
Minneapolis Fed President Neel Kashkari Warns U.S. Inflation Remains Too High Across Sectors
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Kashkari said inflation remains too high even after excluding volatile food and energy prices, indicating that underlying price pressures are still broad-based.
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Kashkari was one of three Federal Open Market Committee officials who favored a rate increase at the Fed’s previous July meeting, when the majority chose to leave rates unchanged.
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Reuters reported that Fed Chairman Kevin Warsh estimated the Fed’s preferred inflation gauge was likely running at about 3.6% in August, while noting that too many categories were still rising by more than 3% over six- and 12-month periods.
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Kashkari said the Fed may need help from other parts of the government or the broader economy to bring inflation down, underscoring the limits of monetary policy in addressing supply and geopolitical disruptions.
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Kashkari’s warning could keep interest rates elevated, putting pressure on bonds, rate-sensitive stocks and highly valued growth companies while potentially benefiting the dollar and financial firms that gain from higher rates.
Minneapolis Federal Reserve President Neel Kashkari warned that U.S. inflation is spreading far beyond oil prices and remains too high across the entire economy GuruFocus. The Fed just raised its benchmark interest rate by 0.25 percentage points to 3.75%-4%, its first increase since 2023, and Kashkari backed the move despite broader economic pressures FXStreet.
Kashkari said inflation is climbing in services and many other sectors, not just energy BloomingBit. While the Fed cannot reopen the Strait of Hormuz or control oil directly, it can stop energy shocks from becoming permanent throughout the economy TradingKey.
Broad Inflation Stretches Beyond Energy Sector
Kashkari stressed that core inflation — which excludes food and oil — remains stubbornly high FXStreet. Fed Chairman Kevin Warsh estimated the Fed's preferred inflation gauge was running at about 3.6% in August Reuters. Too many product categories are still rising by more than 3% over both six-month and 12-month periods, signaling deeply rooted price pressures Reuters.
Kashkari Pushed for Rate Hike Before July Holdout
Kashkari was one of only three Federal Open Market Committee members who voted to raise rates in July, when the majority chose to pause InvestingLive. His hawkish stance suggests he saw inflation risks that other officials downplayed at that time. Now the committee has moved in his direction, with the September rate increase signaling renewed concern about price growth.
Fed Acknowledges Limits of Interest-Rate Policy
Kashkari acknowledged that the Fed cannot solve every inflation problem alone TradingKey. Geopolitical events like the Strait of Hormuz disruption create supply shocks that monetary policy cannot fix. He said the government and broader economy must help bring inflation down to the Fed's 2% target GuruFocus.
Kashkari's Stance Could Push Rates Higher Into Year-End
Kashkari's warnings suggest the Fed may raise rates at least one more time before 2024 ends FXStreet. Higher rates will pressure bonds and growth stocks but may boost the dollar and financial firms that profit from elevated lending rates. The labor market and broader economy remain resilient, giving the Fed room to keep tightening BloomingBit.
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