Fed's Kashkari Warns Iran Conflict Could Prompt Rate Hikes

On May 3, 2026, Minneapolis Fed President Neel Kashkari told CBS’s *Face the Nation* that the U.S.–Israel war with Iran raises inflation risk and could force the Fed to raise rates. He said he cannot signal a near-term cut and warned the Fed may need to move “the other direction.” Kashkari joined Cleveland and Dallas Fed presidents in voting against language that the next move would be a cut; Governor Stephen Miran dissented for a cut.

Fed's Kashkari refuses to rule out rate hikes as Iran conflict stokes inflationNew York PostFed’s Kashkari hints at possible rate hikes amid Iran war inflation concernsKashkari warns Iran war could limit Fed rate cuts amid inflation concernsFed’s Kashkari warns Iran conflict impacting inflation, complicates rate cutsKashkari hints at possible Fed rate hikes amid Iran conflict inflation concerns

The conflict began on 28 February 2026 when U.S. and Israeli airstrikes hit Iran, prompting a blockade of the Strait of Hormuz, which carries about 20 % of global oil and gas. The closure has lifted energy prices, adding to an inflation environment already above the Fed’s 2 % target; the personal-consumption-expenditures index was 3.5 % YoY in March. Officials note the shock follows years of inflation overshoot.

US-Iran war impacts credit markets, dims 2026 Fed rate cut prospects

Key voices: Minneapolis Fed President Neel Kashkari, Cleveland and Dallas Fed presidents, Governor Stephen Miran, Chicago Fed President Austan Goolsbee, Treasury Secretary Scott Bessent.

Fed's Kashkari refuses to rule out rate hikes as Iran conflict stokes inflation

The Fed’s target range stays at 3.5 %–3.75 %. March PCE inflation is 3.5 % YoY. Market pricing shows a 3.6 % chance of a June cut and an 88.5 % chance of no change in July.

Fed’s Kashkari warns Iran conflict impacting inflation, complicates rate cuts

The war-driven inflation risk limits guidance, eroding the Fed’s credibility and increasing market uncertainty about future rate moves.

US-Iran war impacts credit markets, dims 2026 Fed rate cut prospects

Kashkari warned that “the longer the Iran war goes on, the greater the risks of higher inflation and economic damage,” and said guidance is impossible. Goolsbee called inflation data “bad news.” Bessent projected oil prices will be “much lower” after the war and called US a “big winner” in energy crisis. Fed statement expects a cut.

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BlackRock analyst Rosenberg said the Fed will likely stay divided for a period. Barclays warned that energy-price pressure could trigger tipping points if inventories fall.

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Sources agree the war heightens inflation risk, yet they differ on whether the Fed will raise rates or maintain its current stance.

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• “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,” — Neel Kashkari, President, Federal Reserve Bank of Minneapolis

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• “bad news.” — Austan Goolsbee, President, Federal Reserve Bank of Chicago

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• “Bessent said the US is a “big winner” in the energy crisis because of its ability to export oil, which is only limited by its ability to load fuel onto ships and send it abroad.” — Scott Bessent, Treasury Secretary

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The Fed’s next meetings are slated for 16-17 June and early July 2026. Market participants will watch for any shift in guidance as the war and Hormuz status evolve.

Fed’s Kashkari warns Iran conflict complicates rate policy, hints at possible hike