Fed’s Kashkari says more rate hikes needed but not sure about this month

Minneapolis Federal Reserve President Neel Kashkari expects additional rate hikes to slow the economy into 2027, but remains uncertain if the next increase should occur this month. At the September meeting, Kashkari and other Fed policymakers voted to raise the central bank's benchmark rate to the 3.75%-4.00% range. He projected one more quarter-percentage-point hike this year and another in 2027.

Since then, the economy has performed better than Kashkari anticipated, and inflation remains elevated. If the economy proves resilient, policy may need to tighten further. Kashkari dissented in favor of a rise at the July meeting and projected one more increase for 2026. Financial markets had anticipated more aggressive Fed tightening, but New York Fed President John Williams recently said no urgency is needed.

The recent rate hike increased long-term borrowing costs, but Kashkari said monetary policy is not currently restraining the economy, as the labor market is healthy and inflation is sticky. The banking sector requires close monitoring due to the rapid shift in borrowing costs. The Treasury market seems functional, and Kashkari sees some confidence that inflation will return to the 2% target in the coming years, but remains cautious due to unexpected shocks.