Neel Kashkari, President of the Federal Reserve Bank of Minneapolis and a voting member of the Federal Open Market Committee (FOMC) in 2026 through a rotating regional president seat, expects one more rate increase this year and another in 2027.

As a voter, that call carries weight. He said the neutral rate is probably higher for now, though he is uncertain where it sits today, and the longer the economy stays strong, the more he questions how tight monetary policy is.

Turning to inflation, he said it remains too high at about 3%, and new data does not alter his outlook. Kashkari warned that rolling supply shocks may boost inflation expectations and stressed that the Fed must return inflation to 2% after an extended period above target.

On growth, he called the economy robust despite shocks, said consumers are still spending, and job seekers are finding positions, and doubted it is struggling outside the AI sector.

Rounding out his remarks, he called the size of the central bank balance sheet a complex issue and said it works best in a near-zero rate environment. He was not shocked that the Fed's Inspector General found no wrongdoing in the renovation project.

Key Quotes:

Monetary Policy

  • Expects one more rate increase this year and another in 2027

  • The longer the economy stays strong, the more I question monetary policy tightness

  • Neutral rate probably higher for the time being

  • Uncertain about current neutral rate

  • The Fed should not blindly follow markets, but cannot ignore their signals

Inflation

  • Inflation still too high, about 3%; new data doesn't alter outlook

  • Rolling supply shocks may boost inflation expectations

  • Central bank must return inflation to 2% considering extended period above target

  • Hopes central bank can reduce inflation with restrained measures

Growth & Economy

  • Economy remains robust despite shocks

  • Consumers are still spending, and job seekers are finding positions

  • Doubts the economy is struggling outside the AI sector

Balance Sheet

  • Size of central bank balance sheet is a complex issue

  • Central bank balance sheet works best in a near-zero rate environment

Fed Transparency & Accountability

  • Not shocked Fed IG found no wrongdoing in renovation project

  • Keen to see outcomes from central bank task forces