Fed's Kashkari Shifts to One Rate Hike in 2025 Forecast
Minneapolis Fed President Neel Kashkari now sees one interest-rate hike this year, citing U.S.-Iran deal uncertainty and AI investment surges.
Minneapolis Federal Reserve President Neel Kashkari has revised his interest-rate outlook, now projecting a single rate hike in 2025 — a notable shift from prior expectations of holding rates steady. Kashkari identified two key forces driving the change: growing doubts about the durability of the U.S.-Iran peace deal and the accelerating buildup of artificial intelligence infrastructure across the economy.
The geopolitical dimension centers on uncertainty surrounding the U.S.-Iran agreement, which carries significant implications for global energy markets. If the deal unravels, oil prices could spike, feeding back into inflation pressures that the Fed has spent years working to contain. Kashkari's acknowledgment of this risk signals that policymakers are watching diplomatic developments as closely as economic data.
Read more Minneapolis Fed's Kashkari Forecasts a Rate Hike This Year →
On the domestic side, the rapid scaling of AI investment represents a separate inflationary variable. Massive capital expenditures tied to AI buildout — spanning data centers, chips, and energy infrastructure — could generate demand-side heat that keeps price pressures elevated longer than the Fed's baseline models anticipated. Kashkari's repositioning suggests he views these forces as strong enough to tip the balance toward tightening rather than patience.
The Minneapolis Fed chief's updated projection adds a hawkish voice to an institution that has been carefully threading the needle between fighting residual inflation and avoiding unnecessary economic slowdown. While one dissenting or revised dot does not dictate Fed policy, Kashkari's public shift could influence the broader committee conversation heading into upcoming Federal Open Market Committee meetings.
Continue reading at MarketWatch.com
