Minneapolis Fed President Neel Kashkari has moved away from penciling in “one or two” interest‑rate cuts in 2026 and adopted a strictly data‑dependent posture after the recent Middle East conflict and rising oil prices clouded the inflation outlook.
Before the geopolitical shock, Kashkari believed inflation would ease enough to permit one or two reductions next year. He now calls the war a new shock that the Fed must evaluate — especially its likely duration and how much it will lift energy costs.
Kashkari said March’s inflation and growth reports did not justify changing the Federal Open Market Committee’s policy statement. He repeatedly emphasized the need for additional data before signaling a move toward easier policy, noting that current readings do not yet support revising the Fed’s stance.
Energy prices are the key variable for him. Speaking in New York, he stressed the central question is how persistent higher oil prices will be and whether they will materially slow progress toward the Fed’s 2% inflation target.
He also urged attention to both legs of the Fed’s dual mandate — inflation and employment — warning against keeping rates needlessly high for so long that they cause unnecessary damage to a still‑resilient labor market. Earlier this year he viewed policy as near neutral and inflation around 2.5%–3% and trending down; with the new geopolitical uncertainty, he has shifted to a more cautious, data‑driven outlook and says it is too soon to assume the 2026 cuts he once expected will still be appropriate.