Fed's Kashkari Shifts to One Rate Hike in 2025 Forecast
Minneapolis Fed President Neel Kashkari now expects one interest-rate hike this year, citing U.S.-Iran deal uncertainty and AI investment risks.
Minneapolis Federal Reserve President Neel Kashkari has revised his 2025 interest-rate outlook, now projecting one rate hike this year — a notable shift from earlier expectations of holding rates steady. Kashkari pointed to two specific forces driving his reassessment: lingering doubts about the durability of a U.S.-Iran peace deal and the accelerating buildout of artificial intelligence infrastructure.
The geopolitical dimension centers on uncertainty surrounding the U.S.-Iran agreement, which Kashkari views as a potential source of inflationary pressure if the deal unravels and energy markets respond. Unresolved tensions in a major oil-producing region could push commodity prices higher, complicating the Fed's effort to bring inflation fully to heel.
Read more Iran Peace Deal Won't Solve Fed's Inflation Problem, Analysts Warn →
On the technology front, the rapid surge in AI-related capital spending is another variable Kashkari flagged as potentially inflationary. Massive investment cycles of that scale can tighten labor markets and strain supply chains, adding upward pressure on prices at a time when the Fed is still working to anchor inflation expectations near its 2% target.
Kashkari's updated stance underscores just how fluid the policy outlook remains inside the Federal Reserve. While one dissenting regional president does not set monetary policy — that power rests with the Federal Open Market Committee — his public comments carry weight as a signal of how policymakers are weighing an increasingly complex mix of geopolitical and technological variables against traditional economic data.
The Fed has held its benchmark rate steady in recent months as it waits for clearer evidence that inflation is sustainably retreating. Kashkari's projection suggests that patience may have limits if new pressures emerge. Continue reading at MarketWatch.com
