Minneapolis Fed President Neel Kashkari said Tuesday the Federal Reserve could hold off on an interest rate cut in December if inflation data comes in hotter than expected.

In an interview with Yahoo Finance, Kashkari also shared his views on inflation, the labor market and the potential effects of Donald Trump‘s tariffs, throwing in some unexpected perspectives.

Housing Inflation: ‘Elephant’ In The Room

Kashkari outlined his view of inflation as a multipart beast, with goods prices normalizing but housing inflation still causing headaches.

“Housing inflation is the big elephant that is still out there,” he said, noting that new lease prices have dropped but will take time to impact broader housing costs.

“I’m not ready to declare victory yet,” he said, adding that the trend in housing inflation is “encouraging.” He said he expects overall inflation to reach the Fed’s 2% target, though it might take another year or two due to the slow-moving nature of housing data.

The Fed official stressed that if inflation “surprises to the upside” between now and December, it might prompt the Fed to pause its anticipated rate cut in the last meeting of the year.

Kashkari’s remarks come ahead of the October inflation report slated for release Wednesday at 8:30 a.m. ET. Economists predict headline inflation could tick up from 2.4% to 2.6% year-over-year, marking the first increase after six consecutive months of declines.

Read also: Trump-Led Market Honeymoon Faces Crucial Test With Wednesday’s Inflation Data

Tariffs Are Only ‘Inflationary’ If Trade Wars Escalate

Kashkari dismissed concerns that Trump’s proposed tariffs would automatically fuel inflation.

“People will pay higher prices, but that doesn’t mean inflation is higher going forward,” he said.

A one-off increase in the price of goods is not enough to trigger a structural inflationary spiral, Kashkari said.

The real risk, according to Kashkari, lies in how other countries respond to U.S. tariffs. If retaliatory tariffs lead to a prolonged trade war, that could create a dangerous inflationary outcome.

“If there’s a tit-for-tat… that could lead to a longer-term inflationary impact,” he said.

US Labor Market: ‘Cautious Optimism’ From Businesses, Workers

The labor market remains a bright spot, according to Kashkari, who described it as “surprisingly resilient.”

With unemployment at a solid 4.1%, businesses and labor groups are showing “cautious optimism,” he said. Some labor unions are preparing for strikes, a sign that workers feel they’re in a strong negotiating position.

“Most of the dimensions we look at, the labor market is still strong,” Kashkari said, adding that consumer spending has also held up despite high rates. The revised savings rate is another encouraging indicator, suggesting that households aren’t overextending themselves even as interest rates remain elevated.

Kashkari Sticks To Fed Independence, Pushes Back Political Pressures

When asked how the Fed might respond if Trump were to pressure the Fed to lower interest rates, Kashkari was unequivocal.

“My colleagues and I are totally committed to achieving the goals that Congress has assigned us — maximum employment and 2% inflation — and we’re going to conduct monetary policy to achieve that,” he said.

Kashkari also addressed questions on the hypothetical scenario of Trump attempting to push out Fed Chair Jerome Powell if he disagrees with the Fed’s interest rate policy.

Kashkari declined to comment directly on this, referring to Powell’s own statements on the matter. “The chairman answered this question last week in his press conference.”

Read also: Powell Dismisses Talk Of Resignation After Trump Victory, Says ‘Policy Is Still Restrictive’

Market Reactions: Rate-Cut Bets Narrow, Treasury Yields Rise

Market expectations for a 25-basis-point rate cut in December dwindled further on Tuesday, reflecting growing uncertainty over the Fed’s rate-cut path.

Fed futures now imply a 56% chance of a December rate cut, with the remaining 44% odds leaning toward rates staying unchanged, according to the CME FedWatch Tool.

Equities were slightly down for the day. The S&P 500 index, tracked by the SPDR S&P 500 ETF Trust SPY, slipped 0.2% before the close in New York.

Treasury yields saw a notable increase, with the yield on the 10-year Treasury note rising by 10 basis points to 4.44%, marking its highest close since early July.

Read Next:

Neel Kashkari photo via the Federal Reserve.