Minneapolis Fed President Neel Kashkari said he is skeptical of the view that the US economy is contracting and that the only support is coming from an artificial intelligence-related construction boom.

Speaking at an event hosted by the Council on Foreign Relations in New York on Wednesday, Kashkari said, "I am skeptical that the rest of the economy is contracting." He added, "If you look at corporate profits, many parts of the economy are broadly very strong, not just those industries directly tied to AI buildout."

The Minneapolis Fed president noted that the current US unemployment rate stands at 4.1%, nationwide layoffs are "very low," and national unemployment claims are also "very low," though he acknowledged that the housing market is under pressure.

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

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

Kashkari said his forecast aligns with the median, but added that new data could change his outlook. He said inflation remains too high and that he hopes the Fed can curb price growth through modest adjustments.

US central bank officials are increasingly concerned that inflation is not confined to categories affected by Middle East conflicts or tariffs.

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