Minneapolis Fed President Neel Kashkari says he expects a rate hike this year
Minneapolis Federal Reserve President Neel Kashkari said Friday that he has changed his perspective and now expects a rate hike will be necessary this year.
Kashkari, speaking a little more than a week after the Federal Open Market Committee decided to keep the benchmark interest rate steady, said he thought a rate hike this year was likely as the economy continues to feel the blow of rising inflation tied to conflicts in the Middle East.
“In March, I predicted a rate cut by the end of the year. In June, I changed that to a rate hike by the end of the year,” the policymaker said during a panel discussion at the Aspen Ideas Festival. “It’s a pen, so we’ll have to see how the data comes in.”
The Commerce Department had previously shown that the headline inflation rate, measured by the Fed’s preferred metric, rose to 4.1%, its highest level since April 2023. Excluding food and energy costs, core inflation was again at 3.4%, the highest level since October 2023.
Inflation has been above the Fed’s 2% target for five years.
Kashkari said that his approach to interest rates has changed, while he remains skeptical that cost increases resulting from energy prices will decrease in the near future.
“I don’t trust Iran to respect the agreement,” he said. “There’s some evidence that they just gave up on this overnight, so I don’t see any clear exit from the Middle East at all, and that makes me cautious about feeling too good that the worst is over.”
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