Minneapolis Fed President Kashkari says inflation is much too high and remains his top priority, warning that unanchored expectations could force more aggressive action, with energy and fertilizer costs key drivers
Summary: Source: Minneapolis Federal Reserve President Neel Kashkari, speaking to CNBC at the Bank of Japan-IMES Conference, 27 May 2026
- Kashkari said inflation remains his primary concern, describing consumer prices as much too high after more than five years above the Fed's 2% target
- The labor market is in decent shape, allowing the Fed to concentrate its attention on bringing inflation down
- He warned that the longer inflation stays elevated, the greater the risk that consumer expectations become unanchored, which would require a more aggressive policy response
- Energy and fertilizer prices were identified as the main drivers of the current inflation surge, with spillover effects into broader categories
- Kashkari cited the Covid-19 pandemic, tariffs, the war in Ukraine, and the Iran conflict as the sequence of global shocks fuelling persistent price pressures
- US headline inflation stood at 3.8% in April; core CPI rose 0.4% on the month and 2.8% annually
Minneapolis Federal Reserve President Neel Kashkari said on Wednesday that inflation remains his overriding concern and that the US central bank has no choice but to keep the pressure on prices, warning that five years of above-target inflation has left consumer expectations dangerously close to becoming unmoored.
Speaking to CNBC at the Bank of Japan-IMES Conference in Tokyo, the same forum where Vice Chair Jefferson delivered his remarks earlier in the day, Kashkari said the labor market is currently in decent shape, a condition that frees the Fed to direct its attention squarely at inflation, which he described as simply much too high.
US headline inflation stood at 3.8% in April. Excluding food and energy, core CPI rose 0.4% on the month and 2.8% annually, both above levels consistent with the Fed's 2% target. Kashkari noted that inflation has now run above that target for more than five years, a duration that he said raises the stakes considerably.
His central concern was the risk of expectations becoming unanchored. If households and businesses begin to assume that inflation will stay elevated and adjust their wage and pricing behaviour accordingly, the task of bringing inflation down becomes significantly harder and the policy response required to achieve it significantly more forceful. "We're much better off doing what we need to do to keep inflation expectations anchored," he said, making clear that the cost of inaction compounds over time.
On the drivers of the current inflation episode, Kashkari traced a sequence of overlapping shocks: the Covid-19 pandemic, tariffs, the war in Ukraine, and now the conflict in Iran. He said some residual pressure from earlier in the cycle remains, but identified energy and fertilizer prices as the primary forces behind the current surge. Both feed directly into other cost categories across the economy, and Kashkari said one of his key watchpoints is how and when energy price pressures spread more broadly into headline inflation.
The remarks are consistent with the tone struck by other Fed officials this week. Governor Cook said inflation is clearly moving in the wrong direction and flagged her readiness to raise rates if disinflation fails to materialise. Jefferson said risks to inflation are tilted to the upside while keeping June's policy meeting explicitly open. Kashkari's comments add weight to a picture of a Fed that is in no hurry to ease and is watching the Iran conflict's commodity market consequences with close attention.
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Kashkari's comments add another voice to the hawkish chorus emerging from the Fed this week, consistent with the tone set by Governor Cook and Vice Chair Jefferson. His explicit warning that persistently elevated inflation could force more aggressive action raises the tail risk of a larger move than markets are currently pricing. The focus on energy and fertilizer as transmission channels ties Fed policy directly to the Iran conflict and its commodity market consequences, reinforcing the read-through from Hormuz developments to US rate expectations.
