Fed's Kashkari: Yet to see evidence core inflation has peaked

Minneapolis Fed President Neel Kashkari is participating in a public Q&A session as part of a weekly series hosted by Travelers. Travelers Institute President Joan Woodward moderates the session.

He said its possible headline inflation has peaked but he is yet to see evidence of that. 

Key quotes

He is seeing little evidence of the labour market softening.

Says surging mortgage costs have a 'profound' impact on the housing sector.
    
''Still working hard to achieve a soft landing.
    
Mixed signals make it hard to get a firm read on economy.
    
Some data points to slower consumer spending.
    
Hasn't seen evidence core inflation has peaked.
    
Fed committed to getting inflation back to 2%.
    
Open to discussing inflation target level once price pressures back to 2%.
    
Some evidence points to improving supply chains.

Possible headline inflation has peaked.

It takes a year or so for fed rate changes to work through economy,
    
Risk of undershooting on rate hikes is bigger than overdoing it,
    
Favors rate hikes until core inflation start to cool,
    
Best guess is that the Fed can pause on rate hikes sometime next year,
    
Fairly confident stagflation won't occur.''

US dollar update

As for the US dollar bounced, it has from two-week lows on Wednesday with a rise in US Treasury yields that made 14-year highs as investors maintained expectations that the Federal Reserve will continue to aggressively raise rates.

The greenback also hit a 32-year peak against the yen and approached the 150 level where some traders think the Ministry of Finance and Bank of Japan might intervene in the tumbling currency.

The Fed expected is expected to lift rates by another 75 basis points when it meets on November 1-2, with an additional 50 basis points or 75 basis points also increase likely in December. 

DXY daily chart

The W-formation's neckline is holding up as support and the DXY index has started to recover from a 50% mean reversion.