Kashkari: Inflation Too High, AI Risks 'Malinvestment' — SkimNews
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- Neel Kashkari said inflation remains "still too high" after August core PCE came in at 3% annual — below economist forecasts but not enough to shift his assessment, since inflation has run elevated for more than five years
- Kashkari raised his neutral funds rate estimate to 3.25%, partly attributing the elevation to AI-driven demand for investment capital
- Kashkari warned the AI buildout could prove "malinvestment" if anticipated productivity gains fail to materialize, creating "big economic consequences for the economy writ large"
- The Federal Reserve issued its first interest rate hike in three years this month and signaled another increase could be on the horizon
- Kashkari characterized the labor market as "pretty good" but not "great," on the same day ADP reported private payrolls expanded more than economists predicted in September
- Kashkari said the AI industry may need to learn to be more "efficient" with money and resources in an era of tighter monetary policy, though he acknowledged rate hikes may not slow hyperscalers by "much"
Why it matters: Kashkari's simultaneous hawkish inflation stance and AI skepticism lands just after the Fed's first rate hike in three years and its signal of another ahead. His 3.25% neutral rate estimate — elevated partly by AI capital demand — frames current tightness as partly structural rather than purely cyclical.
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