Kashkari Wants Higher Rates, Markets Yawn in 4K 🏦

Federal Reserve Bank of Minneapolis President Neel Kashkari said it was time for the central bank to slowly begin raising interest rates as inflation continues to run above target, making the case in a CNBC interview that policy is not currently restrictive enough to bring prices back in line. Kashkari cited uncertainty around oil flows through the Strait of Hormuz as a factor that could push energy prices higher, reinforcing his argument for a measured tightening cycle rather than a wait-and-see posture.

Kashkari was one of three dissenters at the July FOMC meeting who voted in favor of a rate hike. He clarified during the interview that he was not pushing for an immediate move at that meeting, but that the Federal Open Market Committee needed to start considering raising interest rates to address price pressures.

Despite Kashkari's comments, derivatives traders are pricing against a Fed rate hike at the September FOMC meeting, with market-implied odds skewing toward a hold. The split between the Minneapolis Fed president's public stance and rate futures positioning highlights the gap between some policymakers' growing concern over inflation persistence and investors' expectations that the Fed will keep rates unchanged through the end of the summer.

Kashkari has held the position of Federal Reserve Bank of Minneapolis President since 2016. The Federal Reserve's benchmark federal funds rate remains in a range last set at the July FOMC meeting, and officials will next issue an updated rate decision at the September gathering, where updated economic projections and a press conference with Chair Jerome Powell are scheduled.