Fed’s Kashkari says inflation fight takes priority as labor market is ‘in decent shape’

Minneapolis Federal Reserve President Neel Kashkari said Thursday that reducing inflation in the United States remains his top priority, warning that consumer prices are still “too high.”

Speaking to CNBC’s Kaori Enjoji at the Bank of Japan-IMES Conference, Kashkari said the US central bank will continue to take a “balanced approach” to its dual mandate of price stability and full employment.

Still, he noted that inflation has remained above the Federal Reserve’s 2% target for more than five years, while the labor market is currently in “good shape.”

“I focus mainly on inflation. I certainly do not ignore the labor market. We need to pay attention to both sides, but the labor market is in good shape at the moment and inflation is very high,” he said.

Kashkari added that the longer inflation remains high, the greater the risk that inflation expectations will not remain constant and rise.

“If that happens, then we have to react even more aggressively, so we’ll be much better off if we do what we need to do to keep inflation expectations stable.”

US headline inflation was last at 3.8% in April. Core CPI excluding food and energy increased by 0.4% and 2.8% respectively.

Kashkari said global inflationary pressures have been fueled by the Covid-19 pandemic, tariffs, the war in Ukraine and now the conflict in Iran.

When asked about the main reasons for the recent increase in inflation, Kashkari said that “previous ones are a bit of a headwind” but attributed the current increase to energy and fertilizer prices.

“Those inputs impact other categories as well, and so one of the things I’ll be exploring is when we’ll see energy prices impact the broader economy and inflation in the broader economy.”

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