The president of the Minneapolis Fed anticipates an additional quarter-point hike this year and another in 2027. He is unsure if the next move will come at the October meeting.
The president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, has indicated that further interest rate increases will likely be necessary to cool the economy ahead of 2027, although he has doubts about the immediate timeline. In an interview with Reuters, reported by eleconomista.com.mx, Kashkari stated that he does not have a firm position on whether the next increase should occur at the October 27 and 28 meeting.
"I have an open attitude" regarding how the Fed will proceed with rate hikes and "I do not have a firm opinion" on whether the next increase should come this month, he declared. The last meeting of the year is scheduled for December 8 and 9.
Kashkari, one of the twelve monetary policy officials who voted to raise the benchmark rate to a range of 3.75% to 4.0% last month, explained that his forecasts presented at that meeting include an additional quarter-point increase this year and another similar one in 2027.
"If the economy proves to be incredibly resilient and, therefore, inflation turns out to be more persistent than I believe, then it may be necessary to raise rates even more than I currently foresee. But I don't know" if that will be how events unfold.
The central banker acknowledged that his outlook has already been challenged by data released since September, which points to a stronger economy than expected and inflation that "remains too high." The Fed has raised rates to contain inflation that has been above the 2.0% target for over five years.
At the September meeting, monetary policy officials also anticipated an additional increase in 2026. Financial markets were expecting a more aggressive tightening until the president of the New York Fed, John Williams, stated that, while he considers another hike this year likely, "there is no need to act urgently." Following those remarks, investors reduced the odds of a hike this month.
Kashkari noted that the recent rate hike contributed to a significant increase in long-term financing costs, but he believes that monetary policy is not significantly slowing the economy. "The labor market seems quite solid at the moment. It appears that the economy is doing quite well, and when I look at that picture, I tell myself: wow, probably monetary policy is not particularly restrictive at this moment," he stated.
The next key date for the markets will be the Fed meeting on October 27 and 28, where it will be decided whether to implement the fourth hike of the year or wait until December.
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