Federal Reserve Bank of Minneapolis President Neel Kashkari said Sunday that the ongoing war with Iran restricts the central bank’s capacity to offer clear guidance on interest rate policy. In an appearance on CBS’s “Face the Nation,” Kashkari noted the closure of the Strait of Hormuz, a chokepoint for about 20% of global oil and gas supplies, as a key factor. He stated that the longer the conflict persists, the greater the risks of higher inflation and economic damage, making it inappropriate to signal rate cuts at this time. [1]
Kashkari said he does not feel comfortable signaling that a rate cut is in the cards, adding: “We might be in worse scenarios, we might have to go the other direction.” The war, which began with U.S. and Israeli airstrikes on Iran in February, has driven energy prices sharply higher, worsening an already elevated inflation environment in the United States. According to Kashkari, the central bank may even need to raise rates to contain rising prices. [2]
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