Federal Reserve Bank of Minneapolis President Neel Kashkari warned that inflation remains the Fed’s primary concern despite growing uncertainty surrounding the global economy and Middle East conflict. Speaking at the Bank of Japan-IMES Conference in Tokyo, Kashkari said inflation in the United States is still “much too high,” while the labor market remains in “decent shape.”
Kashkari emphasized that the Fed must continue taking a “balanced approach” toward its dual mandate, but acknowledged that inflation persistence is becoming increasingly worrying after more than five years of elevated price pressures. “The longer inflation remains elevated, the greater the risk that inflation expectations become unanchored and move higher,” he warned. Kashkari added that if inflation expectations were to drift higher, policymakers “would have to respond even more aggressively”.
The Minneapolis Fed President also pointed directly to the Iran conflict as an important inflation driver, alongside the pandemic, tariffs, and the war in Ukraine. He said rising energy and fertilizer prices are now feeding broader inflation pressures across the global economy. “One of the things I’m going to be looking for is, when do we see energy prices affecting the broader economy,” Kashkari said, highlighting growing concern inside the Fed about second-round inflation effects spreading beyond oil markets alone.
