Minneapolis Fed President Neel Kashkari said in a Reuters interview on October 1 that further rate increases will likely be needed into 2027, while leaving the timing of the next move unresolved. Kashkari said he was “open-minded” about the October 27–28 meeting and did not have “a strong view” on whether the Fed should hike then. His September projections called for one more 25bp increase in 2026 and another in 2027, keeping further tightening as his baseline even as the near-term timetable remains flexible.
Kashkari also signaled that risks to his current rate path may be skewed higher if economic resilience persists. Since the September meeting, he said “the data that I’ve gotten suggests the economy is doing even better than I anticipated” while “inflation is still too elevated.” If growth remains exceptionally strong and inflation proves stickier than expected, he said “policy could need to go higher yet than I’m anticipating at this moment.” Kashkari added that with the labor market looking healthy and the economy performing well, “policy is probably not particularly restrictive right now.”
He also linked the recent rise in long-term yields partly to a stronger perception of Fed commitment under Chairman Kevin Warsh. Kashkari said some of the move reflected real economic developments, but added that markets may also be concluding that “the Warsh Fed, it’s not talk, the Warsh Fed is really serious about controlling inflation.” At the same time, he said markets were functioning properly and saw “no evidence of systemic risk.” His overall message was therefore hawkish on direction but open on timing: more hikes remain likely, October is not predetermined, and a stronger-than-expected economy could still push rates above his current projected path.
Key Takeaways
- Minneapolis Fed President Neel Kashkari still expects additional rate hikes into 2027, but he is not committed to moving at the October 27–28 meeting.
- He said he was “open-minded” on October and did not have “a strong view” on whether the next hike should come then.
- Kashkari’s September projections called for one more 25bp hike in 2026 and another in 2027.
- Recent data have been stronger than he expected, with Kashkari saying “the economy is doing even better than I anticipated” while inflation remains “too elevated.”
- He warned that if growth stays exceptionally resilient and inflation proves stickier, “policy could need to go higher yet” than his current forecast.
- Kashkari said current policy is “probably not particularly restrictive right now,” citing a healthy labor market and solid economic performance.
- He attributed part of the rise in long-term yields to markets taking the Fed’s inflation commitment under Chairman Kevin Warsh more seriously.
- Kashkari saw “no evidence of systemic risk” from the recent market volatility, while noting the banking sector still warrants monitoring.
- Overall, his message was hawkish on direction but flexible on timing: more tightening remains his baseline, but October is not predetermined.
