Fed Minneapolis President Kashkari Calls for Small Rate Increase to Tackle Inflation

Minneapolis Federal Reserve President Neel Kashkari said the central bank should begin a modest increase in the federal funds rate to address persistent inflation. In an interview on CNBC's "Squawk Box," he argued that recent corporate earnings, consumer spending, and labor market conditions do not show that current policy is overly restrictive, allowing room for a 25-basis-point hike.

"I look at this constellation, and I say, ‘What evidence do I have that monetary policy is particularly restrictive right now?’ So, I argued now is the time to start slowly moving up as we get more data in," Kashkari said. He emphasized that the move would be incremental rather than dramatic, aiming to prevent inflation from becoming entrenched and requiring larger rate hikes later. Kashkari noted that Fed Chair Kevin Warsh told him to act according to his own judgment, which he appreciated. Kashkari joined two other Fed officials—Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack—in dissenting from the recent 9-3 vote that left rates unchanged. All three highlighted inflation rates still above the Fed's 2% target, with June CPI at 3.5% and the personal consumption expenditures index at 3.7%. Upcoming CPI and PCE releases in July will inform the next policy decision, scheduled for the September 15-16 FOMC meeting. Market pricing currently shows a roughly 55% chance of a 25-basis-point hike at that time.