THE Fed Isn’t Done, Even When the Numbers Look Better

According to CNBC, Minneapolis Fed President Neel Kashkari told Steve Liesman Wednesday night that inflation remains “still too high” despite a softer-than-expected PCE reading, while describing the labor market as “pretty good.” The Fed is staring at data that looks like progress and choosing to treat it as insufficient.

Core PCE has been drifting lower, which is exactly what the Fed said it needed to see. But Kashkari’s framing tells you something important about where the Fed’s head is right now. Inflation is still running hot by historical standards, and the Fed knows that one soft print doesn’t change a trend. The current monetary policy stance is genuinely restrictive by historical measures, and long-term interest rates are sitting in the upper range of their history too. That combination puts real pressure on borrowing costs across the economy: mortgages, corporate debt, capital expenditure financing. The Fed is essentially saying the cost of being wrong about inflation coming down prematurely is higher than the cost of holding tight a little longer.

The labor market piece matters here too. A “pretty good” jobs picture gives the Fed cover to stay patient. When unemployment is low and hiring is steady, the Fed can keep rates elevated without triggering the kind of economic damage that would force its hand.

Historically, when real policy rates have been this elevated relative to trend inflation, investors have focused on how long the restrictive stance persists rather than whether rates go higher. Duration of tightness matters as much as the peak rate itself. The question worth sitting in front of is whether current long-term rates are already pricing in a longer plateau, or whether markets are still underestimating how patient this Fed is prepared to be.

Bottom Line: Softer PCE data is progress, but Kashkari’s comments are a reminder that “progress” and “mission accomplished” are two very different things for a Fed that has been burned before by declaring victory too early.

Read more: CNBC Top News

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