Minneapolis Federal Reserve President Neel Kashkari told Reuters on Thursday that the central bank will likely need to raise rates again as it works to bring inflation back to the 2% target, but he stopped short of committing to a specific timing for the next move.
Open‑minded on October decision
Kashkari said he is “open‑minded” about how the Fed proceeds and does not have a “strong view” on whether the next hike should happen at the October 27‑28 policy meeting. The Fed’s final meeting of the year is scheduled for December 8‑9.
Projected path for 2026‑27
He was among the 12 policymakers who voted to lift the benchmark rate to the 3.75%‑4.00% range last month. In the projections he submitted for that meeting, Kashkari called for one more quarter‑point increase this year and another similar move in 2027.
Economy performing better than expected
While declining to label the risks, Kashkari noted that recent data suggest the economy is doing “even better than I anticipated,” even as inflation remains “still too elevated.” He warned that if the economy proves “incredibly resilient” and inflation stays sticky, policy may need to go higher than he currently expects.
Labor market and monetary stance
“The labor market looks quite healthy right now. It seems like the economy is doing quite well,” Kashkari said, adding that this constellation suggests policy is not “particularly restrictive” at the moment.
Financial markets remain orderly
Despite recent volatility, Kashkari said he sees no evidence of systemic risk in the markets and believes the Treasury market is functioning properly. He noted that the banking sector warrants close monitoring given the rapid shift in borrowing costs.
Fed’s inflation outlook
He expressed confidence that inflation is heading back toward the 2% goal over the next couple of years, though he acknowledged that unforeseen shocks could alter the path.
Context of recent Fed actions
The Fed raised rates last month to curb inflation that has been above target for more than half a decade. Kashkari dissented from a rate increase at the July meeting but voted for the July‑August hike. Policymakers also penciled in one more increase for 2026. New York Fed President John Williams recently said another hike is likely this year but stressed there is “no need for urgency,” prompting investors to lower the odds of an October move.
Kashkari added that long‑term rates have moved sharply in recent weeks, reflecting both real economic developments and the Fed’s serious stance under new Chairman Kevin Warsh.
As the Fed navigates a delicate balance between supporting a strong labor market and taming persistent inflation, Kashkari’s remarks underscore the uncertainty facing policymakers as they weigh the timing and magnitude of future rate adjustments.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
