The President of the Minneapolis Fed says he wants to see "many more months" of improving inflation figures before interest rates are cut in the U.S.

Neel Kashkari warned it is unclear whether inflation will fall back to the Fed's 2% target—and because of this, the door must be left open to rate hikes.

Although the consumer price index (CPI) fell quickly in the second half of last year, Kashkari told CNBC that progress in recent months has been "sideways."

He asked, "Is the disinflationary process continuing, or are we landing to more of a 3% inflation level? I think it's still too early to know, and we need to wait and see to get more confidence."

Higher interest rates are designed to weaken spending in the economy, encouraging consumers to save rather than spend.

Kashkari says that because America's labor market is still strong, the Federal Reserve shouldn't feel the need to rush.

"Consumers have remained remarkably resilient, the housing market has remained resilient, so I'm not seeing the need to hurry and do rate cuts. We should take our time and get it right," he added.

While CPI is a closely watched measure of inflation in the media, the Fed prefers to use a metric called the core personal consumption expenditures price index.

The latest data on PCE will be released on Friday and could help inform the central bank's rate decisions.

The race to cut rates

Central banks in major economies were largely in lockstep as they moved to cut interest rates during Covid—with many countries seeing inflation surge to 40-year highs.

But now, it appears that the Bank of England and the European Central Bank may end up lowering their base rate much sooner than the Fed.

According to the CME FedWatch tool, traders think there's now no chance of rates easing when the U.S. central bank next meets on June 12—and only a 10.2% chance at the end of July.

But by contrast, attitudes appear to be much different over in London.

Financial markets there believe there's a high likelihood of the Bank of England lowering its base rate from 5.25% this summer—probably on August 1, but possibly in June.

The economy has taken center stage now a general election has been called in the U.K.—and incumbent Conservative Prime Minister Rishi Sunak is widely expected to lose to his Labour rival Sir Keir Starmer.