Neel Kashkari, president and chief executive officer of the Federal Reserve Bank of Minneapolis, attends a Bloomberg Invest event in New York, USA, on Tuesday, March 3, 2026.
Michael Nagle | Bloomberg | Getty Images
Minneapolis Fed President Neel Kashkari on Friday revised his outlook and said he expects one rate hike before the end of the year.
In his remarks just over a week after the Federal Open Market Committee decided to keep interest rates on hold, Kashkari said there was a strong possibility that interest rates would rise by the end of the year as the economy continues to be hit by soaring inflation caused by fighting in the Middle East.
“In March, we had a goal of one rate cut by the end of the year, but in June we changed that to one rate hike by the end of the year,” the policymaker said during a panel discussion at the Aspen Ideas Festival. “This is a pencil, so we need to see how the data comes in.”
A report released by the Commerce Department earlier this week showed that headline inflation, as measured by the Fed’s preferred index, rose to 4.1%, the highest level since April 2023. Core inflation, which excludes food and energy costs, was 3.4%, also the highest since October 2023.
Inflation has been above the Fed’s 2% target for the past five years.
Kashkari said his approach to interest rates is changing as he remains skeptical that rising costs caused by energy prices will subside quickly amid continued unrest in the Middle East. President Donald Trump on Friday accused Iran of violating the ceasefire agreement.
“We do not believe that Iran will comply with whatever agreement is reached,” he said. “We are certainly not all clear on the situation from the Middle East, as there is some evidence that they have already begun to rebel overnight, so we are cautious about getting too comfortable that the worst is behind us.”
While much of the spike in inflation is due to oil prices, Kashkari cited other factors.
“Inflation is driven by supply dynamics, and whether tariffs are driving up the prices of goods we buy from abroad, it’s fertilizers that are being disrupted because of the Strait of Hormuz and the prices of energy and oil coming from the Strait of Hormuz,” he said. “It’s also being driven by massive investments, hundreds of billions of dollars a year, in data centers and the infrastructure that goes with them. Anything that touches on these areas is causing prices to skyrocket in that part of the economy.”
Early comments from policymakers at the Fed meeting suggest a range of views on the FOMC, of which Kashkari is a voting participant this year.
On Thursday, New York Fed President John Williams said he expects inflation to ease and that current policy is well-positioned given the current dynamics. At the same time, Chicago Fed President Austan Goolsby told CNBC he remains concerned about inflation, but declined to speculate on what direction he expects interest rates to go.
Correction: Kashkari’s remarks were delivered on Friday. The date was incorrectly listed in the previous version.
