Minneapolis Fed president Neel Kashkari has moved from penciling in one or two interest‑rate cuts in 2026 to a strictly data‑dependent stance after the Iran war and higher oil prices clouded the inflation outlook.
Before the conflict escalated, Kashkari expected inflation to ease enough to allow “one or two” cuts later in 2026. He warned, however, that the war is a new shock the Fed must assess — particularly its duration and how large an effect it will have on energy prices.
Kashkari said March’s inflation and growth readings were not sufficient to change the Federal Open Market Committee’s policy statement. He repeatedly stressed the need for more data before shifting guidance toward easier policy, noting that current readings do not yet justify revising the Fed’s stance.
Energy costs are a key swing factor for him. Speaking in New York, he emphasized that the central question is how persistent higher oil prices will be and whether they will materially slow progress to the Fed’s 2% inflation target.
At the same time, Kashkari has warned the Fed must watch both sides of its dual mandate — inflation and employment. He said policymakers should avoid driving rates so high for so long that they inflict unnecessary damage on a labor market that has remained broadly resilient.
Earlier in the year he characterized policy as close to neutral and saw inflation running around 2.5%–3% and trending lower. But with the geopolitical shock from the Middle East, he has adopted a more cautious, data‑dependent tone and said it is too soon to be confident that the cuts he once expected for 2026 remain appropriate.