Fed’s Policy Pivot: Kashkari’s Hawkish Turn and Market Ripples

In March, Minneapolis Fed President Neel Kashkari forecast a year-end rate cut. By June, he switched to a year-end hike, the first core official to adopt a hawkish stance. The shift follows the June FOMC decision to hold rates steady, underscoring a split within the Fed.

First Fed Rate-Hike Hawk Emerges. Core Voter Kashkari Officially Pivots, Explicitly Backing One Hike by Year-End

The Fed’s preferred PCE price index rose to 4.1%, its highest since 2023, while core inflation hit 3.4%, both above the 2% target for years. Energy costs, lifted by the Middle-East conflict and an uncertain U.S.–Iran cease-fire, keep pressures sticky, prompting Kashkari to cite “geopolitical risks” as a key factor.

First Fed Rate-Hike Hawk Emerges. Core Voter Kashkari Officially Pivots, Explicitly Backing One Hike by Year-End

The dollar index slipped 0.07% as WTI crude fell over 3% to a four-month low, easing inflation expectations. The currency rebounded after Kashkari’s hawkish remarks. Market pricing shows a 30% chance of a 25-bp cut at the July meeting and a 63% probability of a September hike, indicating divergent forecasts.

Dollar Slips as Lower Crude Prices Ease Rate-Hike Concerns

Kashkari warned that rate cuts in 2026 are off the table and another hike is moving closer. Fed Chair Kevin Warsh kept the range at 3.50-3.75% but signaled a tilt toward tighter policy. Citi sees cuts from October. Morgan Stanley expects rates unchanged through 2026, citing unemployment below 4% or stubborn inflation as a trigger. Bank of America projects three hikes from September.

Fed Rate Hike Outlook: Morgan Stanley Sees No Rate Increase in 2026 Despite Inflation Risks

Citi’s outlook clashes with Kashkari’s hawkish stance and Bank of America’s three-hike forecast. Morgan Stanley’s view further underscores the split, indicating upcoming data could shift the Fed either way.

Fed Rate Hike Outlook: Morgan Stanley Sees No Rate Increase in 2026 Despite Inflation Risks

Gold settled at $4,103.70 per ounce, about 2% lower for the week and 27% below its 2026 peak. A June “death cross” leaves the metal above the $4,000 support line. Central banks have added 850 tonnes in 2026, with 89% expecting reserves to rise and 45% planning purchases, providing a floor. Ghana’s new law, effective July 1, will require one-third of output to the state, tightening supply.

Gold's $4,000 Line Holds as Central Bank Buying Offsets Fed Rate Hike Jitters and Geopolitical Easin

Analysts differ on odds, ranging from a 30% cut chance to a 63% hike likelihood. Inflation outlooks also diverge: some see falling oil prices easing pressure, while Fed officials stress persistent price growth. The impact of Ghana’s mining rule on global gold supply remains unquantified.

Gold's $4,000 Line Holds as Central Bank Buying Offsets Fed Rate Hike Jitters and Geopolitical Easin

• “concerned about inflation” — Neel Kashkari, Minneapolis Fed President

Dollar Slips as Lower Crude Prices Ease Rate-Hike Concerns

• “That prompted Minneapolis Fed President Neel Kashkari to declare that rate cuts in 2026 are off the table and that another hike is moving closer.” — Neel Kashkari, Minneapolis Fed President

Gold's $4,000 Line Holds as Central Bank Buying Offsets Fed Rate Hike Jitters and Geopolitical Easin

Upcoming events include U.S. non-farm payrolls (July 2), ISM manufacturing index, and Fed Chair Warsh’s hearing on liquidity. The September FOMC meeting will reveal whether the Fed follows Kashkari’s hawkish tilt or a dovish path. Ghana’s mining law takes effect July 1, adding a supply variable for gold.

Gold Steadies Near $4,100 as Institutional Buying Offsets Renewed Rate-Hike Fears