Two Federal Reserve officials issued consecutive warnings about U.S. inflation on September 20 and 21, highlighting that elevated price levels extend well beyond the recent surge in oil costs. Minneapolis Federal Reserve President Neel Kashkari stated that inflation across various sectors of the American economy remains excessively high, not solely attributable to rising energy prices. Chicago Federal Reserve President Austan Goolsbee echoed this sentiment, noting that inflation may no longer be driven merely by tariff and energy price shocks, as robust demand could begin adding further upward pressure.

Kashkari, speaking in a media interview on September 20, emphasized that even after excluding energy and food prices, U.S. inflation remains too elevated. "The inflation Americans feel daily goes far beyond oil prices. It exists across all facets of the economy, such as the services sector," he said. Kashkari also pointed out that the Fed cannot directly resolve oil price increases stemming from geopolitical conflicts or supply disruptions, but it can prevent these shocks from spreading further into broader inflation.

Goolsbee, addressing an OMFIF event in London on September 21, remarked that certain supply shocks initially expected to have one-off or temporary effects are lasting longer than anticipated. Over the past period, markets have repeatedly pushed back their expectations for when U.S. inflation will peak and retreat, a trend he finds less than reassuring. Goolsbee stated, "We need evidence that these shocks are indeed subsiding, otherwise it's hard to see a credible path to returning inflation to 2%, and even harder to justify continuing to overlook these shocks."

Another risk point Goolsbee raised was demand. Strong U.S. demand may have already started adding extra momentum to inflation, with artificial intelligence-related investment deserving particular attention. He noted that the boom in building AI infrastructure, such as data centers, could spill over beyond its own sector, pushing total output beyond what the economy can absorb. Goolsbee further explained, "Once we confirm that demand is overheating, there is no ambiguity about how the Fed would respond," meaning that higher interest rates would be required to curb demand. However, he is not a voting member this year and did not comment on the Fed's policy meeting outcome last week in his remarks.

Last week, the Federal Reserve announced a 25-basis-point rate hike, bringing the target range to 3.75% to 4%, with the decision passed unanimously. Meanwhile, the Fed's latest economic projections indicate that most officials anticipate at least one more rate increase within the year.