Minneapolis Federal Reserve President Neel Kashkari has become more cautious about the possibility of interest rate cuts in 2026.
Earlier, Kashkari believed inflation could cool enough to support one or two rate cuts during the year. However, the Iran war and rising oil prices have made the outlook less clear. He now says the Federal Reserve should wait for more data before deciding its next move.
Kashkari Moves Away From Clear Rate-Cut Expectations
Before the conflict in Iran escalated, Kashkari expected inflation to keep moving lower. That could have allowed the Federal Reserve to cut interest rates once or twice in 2026.
But his latest comments show a more careful tone.
Kashkari now believes the Fed must watch how long the war affects global energy prices. If oil prices stay high for a longer period, inflation could become harder to control. That would make rate cuts more difficult.
War and Oil Prices Add New Pressure
Energy prices are one of the biggest concerns for policymakers right now.
Higher oil prices can raise costs for transportation, goods, and services. If those costs remain elevated, they can slow progress toward the Fed’s 2% inflation target.
Kashkari has said the key question is whether the rise in energy prices is temporary or long-lasting. A short-term price shock may not change the Fed’s direction much. But a longer period of higher prices could force officials to keep rates higher for longer.
March Data Was Not Strong Enough to Shift Policy
Kashkari also said recent inflation and growth data from March were not strong enough to change the Fed’s policy statement.
The data did not show a major new problem, but it also did not give the Fed enough confidence to signal a clear move toward rate cuts.
Because of this, Kashkari continues to support a data-dependent approach. In simple terms, the Fed wants to see more evidence before making a major decision on interest rates.
Fed Must Balance Inflation and Jobs
Kashkari still believes inflation can move lower over time. However, he also says the Fed must be careful.
The central bank has two main goals: keeping inflation under control and supporting a healthy labor market. If the Fed cuts rates too soon, inflation could remain high. But if it keeps rates too high for too long, it could hurt jobs and economic growth.
That is why Kashkari says policymakers must “watch both sides” of the Fed’s mandate.
Tariffs Add More Uncertainty
The inflation outlook has also been complicated by President Donald Trump’s tariff policies. Tariffs can raise the cost of imported goods, which may add more pressure to consumer prices.
Combined with the Iran war and higher oil prices, tariffs make it harder for the Fed to predict where inflation is heading.
This is one reason Kashkari is avoiding firm promises about rate cuts.
Fed Outlook Remains Unclear
Kashkari’s latest comments show that hopes for 2026 interest rate cuts have cooled.
He has not ruled out cuts completely. However, he now appears less confident than before. The Fed will need to see whether inflation keeps falling, whether oil prices stabilize, and whether the labor market remains strong.
