Minneapolis Fed President Neel Kashkari said overnight that the balance of risks in the U.S. economy has shifted, with greater danger of a labor market slowdown than of a sharp rebound in inflation. Neveretheless, he added that while policymakers may be leaning toward the view that the economy is weakening, “we’re more likely betting that the economy is really slowing more than it really is.”
Kashkari downplayed fears of inflation reaccelerating to 4% or 5%, noting that the arithmetic of tariff effects does not support such a scenario. Instead, he described the main concern as “persistence”, with price pressures potentially staying near 3% for “an extended period” rather than spiking.
He also addressed the impact of the ongoing government shutdown, saying that while the lack of official data complicates decision-making, Fed officials still have access to timely private indicators and feedback from business outreach.
“We can make our way through while the shutdown is happening,” Kashkari said. “But the longer it goes on, the less confidence I have that we are reading the economy appropriately.”
