Fed's Kashkari Shifts to Hawkish Stance, Now Forecasts One Rate Hike in 2026

According to remarks on June 26, Minneapolis Federal Reserve President Neel Kashkari adjusted his 2026 interest rate forecast from predicting one rate cut to projecting one rate hike, citing escalating inflation pressures. Speaking at the Aspen Ideas Festival, Kashkari cited broad-based price pressures driven by Middle East geopolitical tensions, import tariffs, and significant AI infrastructure investment by corporations.

The Personal Consumption Expenditures (PCE) price index rose 4.1% year-over-year in May, marking the highest level since April 2023, while core PCE climbed to 3.4%, according to Commerce Department data released this week. Among the 19 Federal Reserve policymakers, nine now project at least one rate hike by year-end, per the latest dot plot.