Federal Reserve Bank of Minneapolis President Neel Kashkari said Sunday that the prolonged Iran conflict increases risks of elevated inflation and economic harm, constraining the central bank's ability to offer clear guidance on interest rate policy.
Speaking on CBS's Face the Nation, Kashkari said he remains focused on the Iran war's effects on inflation and economic demand during the continued closure of the Strait of Hormuz, which handles 20% of global oil and gas supplies.
The conflict started when U.S. President Donald Trump and Israel conducted airstrikes on Iran on February 28, triggering a sharp rise in energy prices worldwide and intensifying inflation pressures in the U.S.
Given the uncertainty surrounding the war, Kashkari said the Fed might need to raise rates.
"I don't feel comfortable signaling that a rate cut is in the cards. You know, we might be in worse scenarios, we might have to go the other direction," he said.
Kashkari joined an unusually large group of dissenters at the latest Federal Open Market Committee meeting, voting against language used in the monetary policy statement.
On Wednesday, the Fed maintained its interest rate target range at 3.5% to 3.75% and kept language suggesting officials still view the central bank's next move as a rate cut.
Kashkari dissented alongside the leaders of the Cleveland and Dallas regional Fed banks. Fed Governor Stephen Miran also dissented, favoring a rate cut.
The three regional Fed dissenters supported holding rates steady and later said interest rates may need to move up or down based on the war's economic impact.
The Fed typically looks past energy price shocks as they tend to fade, but some officials noted the current situation follows years of inflation exceeding the Fed's target.
source https://www.investing.com/news/economy-news/feds-kashkari-warns-iran-war-raises-inflation-risks-rate-cuts-uncertain-4654897
