Minneapolis Federal Reserve Bank President Neel Kashkari says inflation is still too high, and he is not ready to declare that the central bank is finished raising interest rates.
"I'm not ready to say that we're done, but I'm seeing positive signs that we may be on our way," Kashkari said Tuesday during an interview at the APi Group's Global Controllers Conference. "Inflation is coming down, we’ve made some good progress, but it’s still too high."
Fed officials penciled in two more rate hikes at their June policy meeting, and then raised rates by a quarter percentage point to 5.25% to 5.50% in July, leaving potentially one more rate hike depending on the data.
Read more: What the Fed rate hike means for bank accounts, CDs, loans, and credit cards
Markets are currently pricing in a nearly 90% chance that the Fed maintains its benchmark interest rate in a range of 5.25%-5.50% at the next meeting in September, according to the CME FedWatch Tool.
The Minneapolis Fed president says he is encouraged by the last two inflation readings from the Consumer Price Index and the Fed’s favored inflation gauge, the Personal Consumption Expenditures (PCE) Index.
In June the PCE grew 3.0% year over year in June, down from 3.8% the month prior and in line with expectations. "Core" PCE, which excludes the volatile food and energy categories, grew 4.1%, down from 4.6% from the month prior and below the 4.2% economists had expected.
He says he needs to see convincing evidence that inflation is well on its way back down to the central bank's 2% target and then he says the Fed can allow some time for rates to remain steady.
"Then we can allow it some time to run. We don't need to get there tomorrow, we can allow it to gradually get there over time," he said.
Kashkari says the Fed wants to avoid a 1970s scenario where the it let off the gas on the belief inflation was coming down only to see inflation surge again, forcing the central bank to jack up rates higher.
The current strength of the job market also raises the question of whether the Fed has done enough to get inflation back to 2%, Kashkari said.
When it comes to cutting rates, something Wall Street is betting will start to happen in the second quarter next year, Kashkari cautions that is a ways off.
"I think we're a long way away from cutting rates because core inflation is still around 4%," he said. "It's still around twice of what our target is. We need to be confident that it's all the way going back down to 2%."
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