Fed’s Kashkari Highlights Broad Inflation Pressures, Markets Anticipate Further Tightening

• Fed’s Kashkari states inflation is too high and widespread across the US economy.
• Markets expect further Fed tightening, with rates potentially reaching 4.00%-4.25% by end 2026.
• This hawkish outlook is seen as supportive for the US Dollar.

Minneapolis Federal Reserve President Neel Kashkari reiterated that inflation in the US economy remains too high and has broadened beyond energy price shocks, impacting all sectors. Despite these inflationary pressures, Kashkari noted the American economy exhibits robust growth, resilience, and a strong labor market, with some signs of improving productivity. Market participants are pricing in a high probability of continued Federal Reserve tightening, with rate futures indicating a roughly two-in-three chance that the policy rate will reach 4.00% to 4.25% by the end of 2026. Furthermore, there is a strong likelihood of at least another 25 basis point hike by mid-2027, a sentiment expected to provide support for the US Dollar.