Fed's Kashkari Says Too Soon To Know Inflation Impact From Middle East Conflict

By Jessica Coacci

Minneapolis Fed President Neel Kashkari said it's too soon to know the imprint the Middle East conflict will have on inflation.

"I felt like policy was in a pretty good place," Kashkari said, speaking at the 2026 Bloomberg Invest conference in New York City Tuesday. "Now we need to see what this new shock, potentially new shock hitting the global economy - how long is the effect, and how big is the effect," he added.

Oil prices continued to rise as the conflict in the Middle East showed signs of widening and escalating on its fourth day. The conversation among investors and economists is how much these price increases will translate into higher inflation readings - therefore affecting the path of policy decisions made by the central bank.

Investors broadly expect the Fed to hold interest rates steady at its March 18 policy decision. The meeting also will bring a new reading of the Fed's dot plot, a set of projections that displays how policymakers expect interest rates to evolve over the next few years.

Kashkari said he expects one rate cut later this year, but now with recent geopolitical events, he needs to examine further data to assess if that stance is appropriate. Before the recent events in the Middle East, he saw inflation running at around 2.5% to 3%. Kashkari added that given the U.S. economy has been this resilient, the neutral rate must be higher, at least in the near term.

"I had a lot of confidence up until a couple of days ago," Kashkari said when discussing his March projections.

Kashkari said he hasn't seen any evidence that President Trump's new global tariff regime is going to lead to a round of elevated inflation.

Setting aside the recent geopolitical events in the Middle East, Kashkari said the risks to inflation and labor market seem to be more balanced.

"Coming into this moment, I was feeling pretty good," he said. "Inflation is still too high, but I feel like it's been slowly heading in the right direction."

As more policymakers weigh in on the inflationary effects of AI-driven productivity gains, Kashkari said in the long-term it is possible that its effects could bring the neutral rate down, but in the short-term there could be pushing up the neutral rate.

Kashkari is a voting member of the Federal Open Market Committee this year.

Write to Jessica Coacci at [e-mail]

(END) Dow Jones Newswires

03-03-26 1343ET