By Michael S. Derby<\/p>\n
NEW YORK, March 3 (Reuters) – Federal Reserve Bank of Minneapolis President Neel Kashkari said on Tuesday that the Iran conflict has increased uncertainty about the U.S. economic outlook and made it harder to know what lies ahead for central bank \u200cinterest rate policy.<\/p>\n
In terms of the outlook, \u201cI had a lot of confidence up until a couple of days ago,\u201d before the joint \u200cU.S.-Israel attack on Iran started, Kashkari said at an event held by Bloomberg in New York.<\/p>\n
The central banker, who has a voting role on the interest-rate-setting Federal Open Market Committee this \u200byear, said he came into 2026 with an expectation that waning inflation pressures would clear the way to a single interest rate cut. Now, when it comes to monetary policy, \u201cwe need to see with this new shock, potentially a new shock hitting the global economy…how long is the effect, and how big is the effect?\u201d Kashkari said.<\/p>\n
\u201cThe question I think that we are wrestling with, and markets are wrestling with, is, how long is this going to last? How bad is \u200cit going to get? Is it going to look \u2060more like Russia-Ukraine, or is it going to look more like Hamas attacking Israel, and that’s going to have effects on monetary policy,\u201d Kashkari said.<\/p>\n
He noted that the inflationary impacts of these kinds of conflicts can be unpredictable and that\u2019s \u2060why he\u2019ll need to see how the data comes in.<\/p>\n
The Fed trimmed its overnight target rate range by three quarters of a percentage point last year to between 3.5% and 3.75% as it sought to support a softening job market while still working to lower high levels of inflation back to 2%.<\/p>\n
While Fed officials had been \u200brelatively \u200bquiet about providing monetary policy guidance so far this year, financial markets had been expecting \u200bFed rate cuts in 2026. Markets started to pare back \u200cthose odds as oil prices rose and threatened what had been progress in lowering inflation. But rate-cut expectations could get new life if it becomes clear that the Trump administration\u2019s war could substantially weigh on economic activity.<\/p>\n
Kashkari noted in his remarks that while the Fed generally tries to look at underlying inflation signals to divine the outlook for price pressures, that could be different in the current situation.<\/p>\n
\u201cIf headline inflation is going to be elevated for an extended period of time, coming off of five years of elevated inflation, boy, that’s a…scenario that we need to pay close attention to\u201d and how it might \u200caffect inflation expectations, Kashkari said.<\/p>\n
Ahead of the attack on Iran, the Fed bank president \u200bsaid he saw a fairly positive outlook for the economy. Inflation was likely to ease \u200band the state of the job market was \u201cpretty good\u201d but softening, he \u200bsaid.<\/p>\n
\u201cI felt like policy was in a pretty good place and we have the luxury of just letting it gradually \u200cglide back to neutral,\u201d he said, noting the uncertainty of \u200bwhat now lies ahead.<\/p>\n
Kashkari also said he\u2019s looking \u200bforward to a productive relationship with Kevin Warsh, named to be next Fed chair to succeed current leader Jerome Powell, whose term as chair ends in May.<\/p>\n
He said he was open to engaging on the prospective Fed leader\u2019s criticism of the institution and his views about how \u200bto manage the Fed\u2019s large balance sheet and rate \u200ccontrol management system.<\/p>\n
Kashkari also said he\u2019d \u201clove it\u201d if Powell decided to stay in his governor term after the chair term concludes. Powell \u200bcan stay in that slot until 2028 and many believe he\u2019ll do so to help protect the central bank\u2019s independence amid \u200battacks from the Trump administration.<\/p>\n
(Reporting by Michael S. Derby; Editing by Andrea Ricci )<\/p>\n","protected":false},"excerpt":{"rendered":"By Michael S. Derby NEW YORK, March 3 (Reuters) – Federal Reserve Bank of Minneapolis President Neel Kashkari…\n","protected":false},"author":2,"featured_media":320487,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[114,184,6863,19430,85,12840,86382,87,46,10361,24398,40148],"class_list":{"0":"post-320486","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-federal-open-market-committee","11":"tag-headline-inflation","12":"tag-il","13":"tag-inflation-expectations","14":"tag-inflation-pressures","15":"tag-iran","16":"tag-israel","17":"tag-monetary-policy","18":"tag-neel-kashkari","19":"tag-the-fed"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/320486","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=320486"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/320486\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/320487"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=320486"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=320486"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=320486"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}