By Ann Saphir
(Reuters) -Minneapolis Federal Reserve President Neel Kashkari on Tuesday said that while the U.S. central bank has made some progress in its inflation fight, interest rates may still need to go higher to finish the job.
“I’m not ready to say that we’re done,” Kashkari told the APi Group Global Controllers Conference in Minneapolis. But with inflation showing signs of slowing in recent months, he said, “I’m seeing positive signs that say, hey, we may be on our way; we can take a little bit more time to get some more data and before we decide whether we need to do more.”
The Fed has lifted its benchmark policy rate target 5.25 percentage points since March 2022 to fight the fastest inflation in 40 years, including a quarter-of-a-percentage point interest-rate hike last month to a 5.25% to 5.00% range.
Yearly inflation by the Fed’s preferred gauge — the personal consumption expenditures price index — has fallen from last summer’s peak of 7% to 3% in June.
Still, Kashkari noted, underlying inflation excluding volatile energy and food prices is still more than twice the Fed’s 2% target, and he needs “convincing” evidence it is coming down further to feel confident the Fed has done enough.
Meanwhile, he added, the Fed is a “long way” from cutting rates, though reducing them next year is a possibility if inflation continues to fall, “just to keep monetary policy at a stable point, not keep tightening,” he said.
The labor market is quite tight, he said, and with economic growth continuing to exceed expectations, there’s no sign that a recession is around the corner. Still, he said, some slowing from rate hikes to date is still likely in the pipeline.
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