Federal Reserve's Kashkari: AI is not the only driver of U.S. economic growth, doubts the claim of "shrinking economy elsewhere"

According to Golden Ten Data, Minneapolis Federal Reserve President Neel Kashkari said he is skeptical of the view that the U.S. economy is contracting and that its only support comes from the construction boom related to artificial intelligence. Speaking at a Council on Foreign Relations event in New York on Wednesday, Kashkari stated, "I doubt that the rest of the economy is shrinking," and "if you look at corporate profits, many sectors of the economy are generally very strong, not just those industries directly related to AI construction."

The Minneapolis Fed President pointed out that the U.S. unemployment rate is currently 4.1%, nationwide layoffs are "very low," and jobless claims are also "very low," but he acknowledged that the housing market is under pressure.

"I think many sectors of the economy are performing well. But AI is clearly the real engine of growth," he said.

Federal Reserve policymakers unanimously voted to raise rates by 25 basis points at their September 15-16 meeting, marking the first hike since 2023. According to the median forecast, they also support one more rate hike this year and another next year.

Kashkari said his forecast is consistent with the median but added that new data could change his outlook.

He said inflation remains too high, and he hopes the Federal Reserve can curb price growth through moderate adjustments.

Officials at the U.S. central bank are increasingly concerned that inflation is not confined to categories affected by Middle East conflicts or tariffs.

"Energy is almost embedded in everything we buy," Kashkari said. "Go talk to companies. Transportation costs throughout the economy are rising, both because of fuel prices and because of labor supply."