Fed's Kashkari: More rate hikes possible if inflation persists

Federal Reserve Bank of Minneapolis President Neel Kashkari indicated on Wednesday, October 1, 2026, that further interest rate increases are a distinct possibility as the central bank strives to return inflation to its target. He described the current economic situation as one where inflation "is still too high," a sentiment not altered by recent data.

Kashkari noted that the Fed's September forecast for rate hikes was a snapshot based on information available at that specific time. He expressed surprise that elevated inflation has persisted for over five years, a scenario he would not have predicted a decade ago. He remains confident, however, that monetary policy possesses the capability to manage and reduce inflation.

Recent market sentiment regarding future rate increases has shifted. This follows comments from New York Fed leader John Williams, who suggested while a rate hike might occur before year-end, there is no immediate urgency. The Federal Open Market Committee had previously raised the target rate by a quarter percentage point to a range of 3.75%-4% in mid-September, aiming to temper persistent inflation.

Fed officials are observing robust economic growth and labor market stability, which they believe provide flexibility to focus on inflation. While officials penciled in one more hike before the end of 2026, financial markets had anticipated a more aggressive tightening path. Kashkari acknowledged market signals but stressed the need for careful consideration rather than blind compliance, given the complexity of market drivers.