Minneapolis Federal Reserve President Neel Kashkari announced on Monday that he believes the central bank is nearing a stage where it should consider halting further interest rate cuts. In an interview with CNBC, Kashkari emphasized the importance of determining whether the focus should be on the sluggish labor market or the persistent issue of high inflation.
Kashkari stated during a live 'Squawk Box' segment on CNBC, "My guess is we're pretty close to neutral right now. We just need to get more data to see which is the bigger force. Is it inflation or is it the labor market? And then we can move from a neutral stance, whatever direction is necessary."
Reaching a neutral policy is crucial for Fed policymakers, who remain divided over the next steps. This group must decide whether to continue the sequence of three rate cuts that occurred in late 2025 or pause and monitor evolving economic conditions.
Currently, the federal funds rate target falls within a 3.5%-3.75% range. Based on projections from a December meeting, this rate is approximately half a percentage point from the consensus on a neutral rate, which neither stimulates nor curtails growth.
Kashkari remarked, "I think inflation is still too high. And the big question in my mind is, how tight is monetary policy? Over the last couple of years, we kept thinking the economy is going to slow down, and the economy has proven to be far more resilient than I had expected. That tells me, well, monetary policy must not be putting that much downward pressure on the economy."
As a voting member of the Federal Open Market Committee in 2026, Kashkari's viewpoint holds significant weight. He expressed concern over the recent rate cuts due to potential inflationary influences, notably from President Donald Trump's tariffs.
Despite concerns over the labor market, where the unemployment rate has increased to 4.6%, Kashkari suggested the committee might soon complete its rate-cutting measures. The Fed's core inflation measure recently stood at 2.8%, although this data's accuracy has been questioned due to government shutdown impacts.
"Inflation risk is one of persistence, that these tariff effects take multiple years to work their way all the way through the system, whereas I do think there's a risk that the unemployment rate could pop from here," Kashkari noted.
Separately, Kashkari expressed his support for Jerome Powell's continued tenure after his term as chair concludes in May. Although Powell is expected to be replaced, his term as governor extends until January 2028. Kashkari added, "I have no idea whether he stays on. I think he's done a wonderful job as chair. None of us are perfect. I think he's not perfect. I'm not perfect. As a committee, we're not perfect. But overall, I think he's done an excellent job, and I would love to see him remain as a colleague for as long as he likes."
President Trump has indicated intentions to announce Powell's successor at some point in January.