Kashkari: Fed May Need to Raise Rates if War Continues to Drive Inflation

On May 3, Minneapolis Fed President Neel Kashkari stated that as the war impacts supply chains and increases inflationary pressures, the Federal Reserve may “need to raise interest rates” in certain circumstances. Kashkari noted that the longer the war lasts, the greater the inflationary pressures will be, and even if the conflict ends immediately, it may still take months for supply chains to recover. He emphasized that the core challenge currently facing the Fed is the “high uncertainty surrounding the inflation path,” and therefore policymakers need to maintain an open mind regarding future interest rate trajectories. Additionally, he expressed that he does not believe the current level of U.S. government debt constitutes an “immediate crisis,” and he looks forward to collaborating with Fed governor nominee Kevin Walsh, being willing to seriously consider some of the concerns he raises.