Minneapolis Federal Reserve Bank President Neel Kashkari predicts a “soft landing” for the US economy, but may need to hike interest rates to combat inflation.

The Fed may raise rates by a quarter of a percentage point and hold borrowing costs steady to bring inflation back to target.

The US unemployment rate has only increased to 3.8%, and the Fed’s favored inflation indicator has decreased from 7% last summer to 3.3% this July.

Kashkari estimates that 40% of the time, inflation stays near 3%, but households are confident enough to spend due to post-pandemic supply constraints.

Most expect interest rates to remain over 5% by the end of next year.