Kashkari: Inflation 'Still Too High' Despite Softer PCE — SkimNews
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- Kashkari said inflation is 'still too high' at around 3% following softer-than-expected August core PCE, calling the new data insufficient to shift a story that's been 'elevated now for more than five years'
- Core PCE rose 3% year-over-year, below economist forecasts, while separate consumer spending and GDP data showed the economy is 'resilient' per Kashkari
- Kashkari described the labor market as 'pretty good' but not 'great,' speaking the same day ADP reported September private payrolls beat expectations
- Kashkari raised his estimate of the neutral funds rate to 3.25%, attributing the temporary elevation partly to investment demand from the AI buildout
- Kashkari warned that if AI investment proves far less productivity-enhancing than assumed, it would constitute 'malinvestment' with 'big economic consequences for the economy writ large'
- The Fed this month issued its first interest rate hike in three years and signaled another could be on the horizon, per the source
Why it matters: Kashkari's 3.25% neutral rate estimate — elevated partly by AI investment demand — is higher than the rate the Fed would need to ease into, meaning policymakers may have less room to cut without restarting inflationary pressures; his malinvestment caution introduces a Fed voice into the AI-bubble debate that has largely been confined to market commentary.
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