Fed’s Kashkari: Inflation is still too high in “all aspects” of US economy
Minneapolis Federal Reserve (Fed) President Neel Kashkari said that inflation is too high across all sectors of the US economy, not just in rising oil prices, Reuters reported on Sunday.
Key quotes
Inflation remains too high.
Inflation extends beyond oil prices.
Hopefully we'll get support from other parts of government, the real economy.
Growth has been fairly robust.
American economy remains very resilient despite wars.
Productivity showing some signs of improvement.
Hopeful growth can prevail and reduce inflation.
Bond market is responsibility of Treasury.
Labor market remains robust.
Market reaction
At the time of writing, the US Dollar Index (DXY) is trading 0.07% higher on the day to trade at 100.30.
Kashkari flags stubborn inflation as resilient US growth keeps Fed bias hawkish
The FXS Speechtracker score of 6.2/10 sits almost exactly in line with the 6.3/10 historical average, signaling a steady, moderately hawkish tone rather than a meaningful shift. Kashkari’s emphasis that inflation “remains too high,” extends beyond oil, and must be tackled with help from the broader economy, alongside comments on robust growth, resilient activity despite wars, and improving productivity, underscores a narrative of persistent price pressures cushioned by solid fundamentals. The acknowledgment that the bond market is the Treasury’s responsibility and that the labor market remains robust reinforces a message that the Fed can stay patient but not complacent on inflation.
The FXS Fed Sentiment Index fell by 1.47 points to 150.61, indicating a modest pullback in perceived hawkishness even as the overall stance remains firmly above the neutral 100 mark. Despite the decline, the elevated level of the FXS Fed Sentiment Index, in line with the stable FXS Speechtracker score, confirms that Fed communication under Kashkari continues to lean clearly hawkish, with resilient growth and a strong labor market keeping the bias tilted toward tighter policy rather than an imminent pivot.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.