Neel Kashkari has warned that a prolonged war involving Iran could fuel inflation and damage the US economy, limiting the Federal Reserve’s ability to guide interest rate policy.
Speaking on CBS’s “Face the Nation”, Kashkari said he is closely watching the conflict and its impact on prices and demand, particularly as the Strait of Hormuz remains disrupted.
The waterway, a key corridor for roughly a fifth of global oil and gas flows, has seen severe disruption during the war, driving up energy costs worldwide.
The conflict, which began after US President Donald Trump and Israel launched strikes on Iran on 28 February, has already pushed global energy prices higher, adding pressure to an already fragile inflation outlook in the United States.
Kashkari said the uncertainty surrounding the war complicates the central bank’s response and could force policymakers to tighten monetary policy.
“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 also broke with the majority at the latest Federal Open Market Committee meeting, joining a larger-than-usual group of dissenters who opposed the wording of the Fed’s policy statement.
