Minneapolis Federal Reserve President Neel Kashkari said he expects additional interest-rate increases may be needed into 2027, while remaining undecided about whether the central bank should raise rates at its October 27–28 meeting.
Kashkari’s September projections included another quarter-percentage-point increase before the end of 2026 and an additional increase in 2027. He said stronger-than-expected economic activity and persistently elevated inflation could require monetary policy to remain tighter than he previously anticipated.
Key Takeaways
- Kashkari’s September projections included another 25-basis-point rate increase in 2026 and one in 2027
- He said he does not have a strong view on whether the next increase should occur at the October 27–28 meeting
- The Federal Reserve raised its benchmark target range to 3.75%–4.00% in September
- Kashkari said recent economic data had been stronger than he expected while inflation remained elevated
- He said financial markets were functioning properly but that the banking sector continued to warrant monitoring
Kashkari Signals Additional Fed Rate Hikes Into 2027
Kashkari said his projections submitted at the Federal Reserve’s September meeting called for one additional 25-basis-point increase in 2026 and another increase of the same size in 2027.
The Federal Open Market Committee raised the federal funds target range by a quarter percentage point at its September 15–16 meeting, bringing it to 3.75%–4.00%. Kashkari joined the other voting members of the committee in supporting the increase.
His individual rate projection does not commit the Federal Reserve to a particular policy path. Each FOMC participant submits an assessment of the appropriate future federal funds rate, while actual decisions are made collectively at scheduled policy meetings.
Kashkari said he remains open-minded about when another increase should occur. He told Reuters that he did not have a strong view on whether the next move should come at the October 27–28 meeting.
The Federal Reserve’s final scheduled policy meeting of 2026 will take place December 8–9, leaving two meetings this year at which policymakers can reassess inflation, employment and broader economic conditions.
Kashkari also indicated that his outlook could change as new data arrive. If economic activity remains unusually resilient and inflation proves more persistent than expected, he said rates could ultimately need to move higher than his current projection.
October Rate Decision Remains Open
Kashkari’s comments leave the timing of another rate increase unresolved even as his broader projection points toward additional tightening.
Other Federal Reserve officials have also emphasized that future moves will depend on incoming information. New York Fed President John Williams recently said there was no need for urgency over another increase even though he viewed an additional hike in 2026 as possible.
Kashkari similarly stopped short of identifying October as the appropriate time for the next move. His position separates the expected direction of policy in his own forecast from the timing of individual rate decisions.
That distinction is important because economic conditions can change between FOMC meetings. Inflation reports, labor-market data, consumer spending and financial conditions can all affect policymakers’ assessment of whether the current rate level is sufficiently restrictive.
The October 27–28 meeting will be the first policy decision since the September increase. The committee will then meet again December 8–9, when officials are also scheduled to release an updated Summary of Economic Projections.
The September projections represent individual policymakers’ assessments at a specific point in time rather than a predetermined schedule for future rate increases.
Kashkari Described the Economy as More Resilient
In his October 1 interview, Kashkari said economic information received since the September meeting suggested the economy was performing better than he had anticipated.
He described the labor market as healthy and said the broader economy appeared to be doing well. In his assessment, those conditions suggested monetary policy might not be particularly restrictive despite the higher federal funds rate.
Kashkari also said stronger economic activity could make inflation more persistent. If that combination continues, he indicated that the Federal Reserve could need to raise rates beyond the path contained in his September forecast.
His comments came before the September employment report released on October 2. That report showed nonfarm payroll employment rising by 29,000 during the month while the unemployment rate edged to 4.2%, meaning those figures were not available during his October 1 interview.
Longer-term borrowing costs have also moved higher as investors reassess growth, inflation and monetary policy. Recent analysis of higher Treasury bond yields has examined how economic strength, investment and expectations for Federal Reserve policy can influence those rates.
Kashkari acknowledged uncertainty around his outlook, emphasizing that future policy will depend on how the economy and inflation evolve rather than on a fixed rate path.
Elevated Inflation Keeps Pressure on Monetary Policy
Inflation remains central to Kashkari’s policy outlook because price growth continues to exceed the Federal Reserve’s 2% objective.
Kashkari said inflation was still too elevated and that recent data had not materially changed his assessment. He also expressed some confidence that inflation could return to the 2% target over the next several years while acknowledging that repeated economic shocks have complicated that process.
Producer-price figures have provided another measure of continuing price pressure. August producer-price data showed the Producer Price Index for final demand rising 5.4% over the 12 months through August and 0.4% during the month.
Producer prices are only one measure of inflation and are not the Federal Reserve’s preferred inflation gauge, but they form part of the broader economic information available to policymakers.
Kashkari’s concern is that an economy capable of maintaining strong activity despite higher interest rates could also sustain inflation pressures for longer than expected.
Under that scenario, he said monetary policy might need to become more restrictive than his current forecast assumes. If economic conditions soften or inflation moves more decisively toward the Fed’s objective, the appropriate policy path could differ.
His September projection therefore reflects his current assessment rather than a guarantee that the Federal Reserve will implement another increase at a particular meeting.
Borrowing Costs and Financial Stability Remain in Focus
Kashkari also addressed the rise in longer-term borrowing costs and the implications for financial markets.
He said part of the movement in long-term rates reflected economic developments, while another part reflected the market’s response to the Federal Reserve’s commitment to controlling inflation under Chair Kevin Warsh.
Higher Treasury yields can affect borrowing costs throughout the economy, including mortgage rates, corporate financing and other forms of credit, even though the Federal Reserve directly sets only its short-term policy rate target.
Despite recent market volatility, Kashkari said he was not seeing evidence of systemic financial risk. He also said the Treasury market appeared to be functioning properly and had been able to absorb significant repricing.
He nevertheless said the banking sector warranted close monitoring because borrowing costs had changed rapidly. Federal Reserve officials continue to assess financial conditions alongside inflation, employment and economic activity when considering monetary policy.
Kashkari’s comments therefore combine an expectation for additional rate increases with uncertainty over their timing. His September forecast includes one more quarter-point increase in 2026 and another in 2027, but future decisions remain dependent on incoming economic and financial data.
Frequently Asked Questions
Who is Neel Kashkari?
Neel Kashkari is president of the Federal Reserve Bank of Minneapolis and a voting member of the Federal Open Market Committee in 2026. He participates in monetary-policy decisions and submits individual economic and interest-rate projections as part of the Fed’s forecasting process.
Does Kashkari expect more fed rate hikes?
Kashkari said his September projections included one additional 25-basis-point increase in 2026 and another in 2027. He also said rates could need to move higher if economic growth remains particularly resilient and inflation proves more persistent than expected.
Will the federal reserve raise rates in October 2026?
Kashkari said he does not have a strong view on whether the Federal Reserve should raise rates at its October 27–28 meeting. The decision will be made by the FOMC based on economic and financial conditions available at the time.
What is the current federal funds target range?
The Federal Reserve’s target range for the federal funds rate is 3.75%–4.00% following the 25-basis-point increase approved at the September 15–16 meeting.
Why is the federal reserve still focused on inflation?
Inflation remains above the Federal Reserve’s 2% objective. Kashkari said persistent inflation combined with resilient economic activity could require a more restrictive policy stance, while stressing that the future rate path will depend on incoming data.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial, investment, tax or legal advice. Federal Reserve policy, interest rates, inflation data and economic conditions can change over time. Readers should consult a qualified financial professional before making investment, borrowing or other financial decisions based on monetary-policy developments.
