Federal Reserve Bank of Minneapolis President Neel Kashkari, a voting member of the FOMC, expressed significant uncertainty regarding the U.S. economic outlook and monetary policy following the recent U.S.-Israel attack on Iran.
Previously confident in a single interest rate cut for 2026 due to easing inflation, Kashkari now emphasizes the need to assess the duration and magnitude of this new geopolitical shock. He highlighted the unpredictable inflationary impacts of such conflicts, drawing parallels to the Russia-Ukraine and Hamas-Israel situations.
The Fed had trimmed its overnight target rate by 0.75 percentage points last year to a range of 3.5% to 3.75%, aiming to support a softening job market while targeting 2% inflation. Kashkari is particularly concerned about the potential for headline inflation to remain elevated for an extended period, which could impact inflation expectations.
While markets had begun paring back rate cut expectations due to rising oil prices, a substantial economic slowdown from the conflict could revive them.
Minneapolis Fed President Neel Kashkari said that one or two interest-rate cuts later this year could be appropriate, but that war in the Mideast could create conditions justifying an extended pause(current)
Originally reported as: “Minneapolis Fed President Neel Kashkari said that one or two interest-rate cuts later this year could be appropriate, but that war in the Mideast could create conditions justifying an extended pause”
