Fed's Kashkari Shifts to One Rate Hike in 2025: What Changed
Minneapolis Fed President Kashkari now sees one rate hike this year, citing Iran deal uncertainty and AI-driven inflation risks.
Neel Kashkari just moved the goalposts. The Minneapolis Fed president — one of the more closely watched voices on the Federal Open Market Committee — now projects a single interest-rate hike before the end of the year. That's a notable shift, and you need to understand what's driving it.
Two factors flipped his outlook. First, Kashkari has doubts about the durability of the U.S.-Iran peace deal. Geopolitical uncertainty around energy supplies is exactly the kind of wildcard that can reignite inflation fast. Second, the AI infrastructure buildout is raising fresh concerns about demand-side price pressure. When capital floods into a sector that fast, costs follow.
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This matters for your trades. Markets had been pricing in rate cuts — not hikes — through much of 2025. A single dissenting Fed voice projecting a hike won't crash equities overnight, but it does put a ceiling on the rate-cut euphoria that's been fueling risk assets. Bond traders especially should recalibrate duration exposure right now.
Kashkari isn't the chair, but Fed presidents move markets when they're candid. His pivot signals that the "higher for longer" debate isn't dead — it just got a second wind from two directions nobody was fully modeling: Middle East diplomacy and the AI capex boom. Don't sleep on either of those inputs.
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