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Minneapolis Fed’s Kashkari says Iran oil shock clouds prospects for rate cuts
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, warned that escalation of the conflict with Iran is creating acute risks to price stability in the United States and is undermining the Federal Reserve’s ability to offer clear guidance on the path of interest rates. In an interview with CBS, he said uncertainty arising from the blockade of the Strait of Hormuz has left the Fed unable to provide firm signals on rate dynamics.
Kashkari, a member of a growing cohort of dissenters within the Fed, said the central bank may have to resume tightening rather than ease policy, contrary to market expectations. "We need to be prepared to move in either direction," Kashkari said. "The data will guide us, not a preset course."
Split monetary policy committee
At its most recent meeting, the Fed left the policy rate within the range of 3.5%-3.75%, but the decision was not unanimous. Kashkari, along with the presidents of the Federal Reserve Banks of Cleveland and Dallas, objected to the committee’s language that still implied cuts as the next step. At the same meeting, President Steven Miran argued for immediate easing.
Energy shock and Fed objectives
The Fed typically treats swings in energy prices as transitory. However, the current supply shock — triggered by US and Israeli air strikes on Iran on February 28 — has layered on top of a prolonged period of inflation above the 2% target.
The partial blockade of a transit route that carries about 20% of global oil and gas traffic has already produced a sharp spike in domestic fuel prices. Regional Fed officials fear that the inflationary impulse could become structural, forcing the central bank to keep borrowing costs higher for longer than markets currently expect. Kashkari’s stance reflects growing concern within the regulator that military action in the Middle East could derail plans for a soft landing of the US economy.
Published 06 May 2026
© InstaFintech Group
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© InstaFintech Group
