Minneapolis Fed president Neel Kashkari has shifted from penciling in one or two 2026 cuts to a data‑dependent stance as the Iran war and higher oil muddy the inflation path.
Summary
- Minneapolis Fed President Neel Kashkari says he had expected inflation to cool enough to justify cutting interest rates once or twice in 2026, but the Iran war has made that outlook far less certain.
- He now argues that recent data, including March’s inflation prints, are not strong enough to change the Federal Open Market Committee’s policy statement, stressing the need to see how long elevated energy prices persist.
- Kashkari still sees inflation trending lower over time, but says policymakers must “watch both sides” of the Fed’s mandate and avoid getting so aggressive on rates that they damage a labor market that remains broadly resilient.
According to Jinshi’s summary of recent remarks, Federal Reserve official Neel Kashkari said that before the Iran conflict escalated, he believed inflation would likely decline enough to make “one or two” interest rate cuts appropriate later this year.
From “one or two cuts” to data‑dependent caution
That view is consistent with comments he made in early March, when he told Reuters it was reasonable to expect a single 2026 cut as inflation pressures eased and the job market softened modestly.
However, he also emphasized in that interview that the Iran war is a “new shock” for the global economy, saying the Fed now has to assess “the duration and magnitude” of the conflict and its impact on energy prices before firming up any rate‑cut path.
March data “not enough” to change the statement
Kashkari’s more recent message has been that March’s inflation and growth data, while not alarming, are not strong enough to warrant changing the Fed’s policy statement or guidance.
In remarks reported by Jinshi, he said the changes seen in March were “not sufficient” to revise the statement, a stance that aligns with his repeated insistence that officials need “more data” before deciding whether to lean more toward fighting inflation or supporting the labor market.
In a January appearance covered by CNBC, Kashkari argued that policy was “quite close to a neutral position” and warned that inflation remained “excessively high,” even as the economy proved more resilient than he had expected.
That has left him wary of promising aggressive easing, especially with President Donald Trump’s tariff regime and the war‑driven spike in oil prices adding fresh uncertainty to the inflation outlook.
Watching energy prices and the dual mandate
Kashkari has repeatedly highlighted energy costs as a key swing factor.
Speaking at a Bloomberg Invest event in New York, he said the central question now is how persistent higher oil prices will be and whether they materially slow progress toward the Fed’s 2% inflation target.
At the same time, he has stressed in interviews reported by Morningstar and Reuters that the Fed must “watch both sides of our dual mandate,” warning that if policymakers push rates too high for too long, they risk unnecessary damage to employment.
Before the latest geopolitical shock, Kashkari said he saw inflation running in the 2.5%–3% range and expected it to trend lower, but he has now adopted a more explicitly data‑dependent stance, saying the war has “obscured” the policy outlook and that it is “too soon” to know whether the Fed can safely deliver the cuts he once penciled in for 2026.
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