Kashkari Says Inflation Is 'Still Too High' After Softer PCE Print, Lifts Neutral Rate View to 3.25%

What happened

Minneapolis Federal Reserve President Neel Kashkari said Wednesday, September 30, 2026, that price growth remains a problem even after the latest inflation data came in cooler than economists had predicted, telling CNBC's Steve Liesman in a one-on-one interview at a Council on Foreign Relations event in New York that "inflation is still too high." His remarks came hours after the Commerce Department released the August personal consumption expenditures price index, the Fed's preferred inflation gauge, which showed core PCE, the measure that strips out food and energy, running at 3% on an annual basis, below the consensus forecast. "There are many different measures of inflation, but it's running at around a 3% rate. It's been elevated now for more than five years. I didn't think the inflation data today really changed that story for me very much," Kashkari said, according to the interview carried by FrankTrades.com. The voting Fed official also said separate data released the same morning on consumer spending and gross domestic product showed an economy that is "resilient," described the labor market as "pretty good" but not "great," and noted that ADP's private payrolls estimate for September had come in above expectations. He raised his estimate of the neutral federal funds rate to 3.25%, a level he suggested is likely elevated temporarily because of demand for investment capital tied to the artificial intelligence boom. The comments land in the same month the Fed delivered its first interest rate hike in three years and signaled that another increase could follow.

Why it matters

The significance of the interview is that a sitting Fed president looked directly at a softer-than-expected print in the central bank's preferred gauge and declined to move his view. Core PCE at 3% annually is above the level policymakers have said they want, and Kashkari framed the figure not as a turning point but as a continuation of a stretch of elevated inflation that he said has now lasted more than five years. That framing matters for expectations about the path of policy: the Fed raised rates this month for the first time in three years and has signaled another increase could be on the horizon, and Kashkari's remarks give no indication that one cooler data point has softened the case for further tightening. His decision to lift his estimate of the neutral funds rate to 3.25% is a substantive signal in its own right, since a higher neutral rate implies policy may need to sit at a higher level than previously assumed to have the same effect. He tied that revision to demand for investment capital during the AI buildout, and he was explicit about the risk: "The fruits have not yet borne out. If this ends up being massive investment that is not nearly as productivity enhancing as we assume, then this will have been malinvestment, and then there could be big economic consequences for the economy writ large." He added that the AI industry may need to learn to operate more "efficiently" with money and resources in an era of tighter monetary policy, while acknowledging that rate hikes may not slow hyperscalers by "much," even as higher borrowing costs could have a helpful impact elsewhere in the economy. For markets, the combination of a hawkish read on inflation, a resilient growth picture, an above-consensus ADP payrolls figure and a higher neutral-rate estimate points toward a policy stance that stays restrictive for longer than a single soft inflation print might otherwise suggest.

How it is being covered

The story is carried by 18 outlets, with a distribution of 9% left, 36% centre and 55% right, according to Ground News. Of the rated sources, 8 of 11 sit in the high factuality band, with 3 rated very high and none rated mixed, low or very low. The coverage shows a blindspot on the left, which accounts for only 9% of outlets carrying the story.

What to watch

The next readings of the PCE price index and the employment data will show whether the softer August core print was a one-off or the start of a trend that could change the calculus inside the Federal Reserve. Attention will also fall on whether other policymakers echo Kashkari's 3.25% neutral-rate estimate or his caution on AI investment, and on whether the Fed follows through on the signal that another rate hike could come after this month's increase, the first in three years. Any further commentary from Kashkari, a former Treasury Department official and Goldman Sachs and Pimco alum, on the productivity payoff of AI spending will be worth tracking as well.

By the numbers

Source snapshot