Fed's Kashkari says inflation 'still too high' despite lower PCE data than expected

Federal Reserve Bank of Minneapolis President Neel Kashkari said Wednesday that inflation remains “too high,” after the the Bureau of Economic Analysis (BEA) released data showing that annual inflation remained above the central bank’s 2 percent target in August.

“Inflation is still too high,” Kashkari told CNBC’s Steve Liesman at a Council on Foreign Relations event in New York City.

“It’s been elevated now for more than five years. I didn’t think the inflation data today really changed that story for me very much,” the Minneapolis Fed president added.

Annual inflation, as measured by the personal consumption expenditures (PCE) price index, was 3.4 percent in August, according to data from the BEA. Core prices, which outstrip more volatile food and energy costs, were up 3 percent year-over-year. 

Inflation has been above 2 percent since March 2021, reaching a 40-year high of 9.1 percent in June 2022, according to the consumer price index, another measure of prices.

Kashkari joined all 11 of his colleagues on the Federal Open Market Committee (FOMC) in voting to raise interest rates by a quarter point last month. The panel will meet again Oct. 27-28, less than a week before the midterm elections.

Since the FOMC raised borrowing costs to a range of 3.75 percent to 4 percent, multiple panel officials have forecast future rate hikes. 

“In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion,” Fed board of governors member Michael Barr said Tuesday at the Detroit Economic Club.

“Looking ahead, if conditions evolve as I expect, some modest further tightening may be warranted,” Anna Paulson, the president of the Federal Reserve Bank of Philadelphia, said last week at a financial technology conference.

“As always, I’ll be watching the data and listening closely to what businesses and workers are telling me,” she added.

One thing the data shows, Kashkari argued Wednesday, is that the U.S. economy is “resilient” amid shocks from the Iran war and President Trump’s tariffs on imports. 

The country’s gross domestic product increased by 2.2 percent annually in the second quarter of this year, the BEA reported Wednesday, up from its previous estimate of 1.5 percent.

“The last several years, in the face of tariffs and trade war, in the face of the geopolitical conflict in the Middle East, it’s remarkable how resilient the U.S. economy has been,” Kashkari told Liesman.