President of Federal Reserve Bank of Minneapolis Neel Kashkari pointed out that the inflationary effects of such conflicts are unpredictable, according to a report from Reuters.
- Before the attack on Iran, the president of the Minneapolis Federal Reserve Bank described the economic outlook as generally positive.
- Kashkari called the Iran war a new shock to monetary policy.
- Former Treasury Secretary Janet Yellen has also reportedly stated that the Federal Reserve faces a complex task on rate cuts because of the war.
President of Federal Reserve Bank of Minneapolis, Neel Kashkari, reportedly said on Tuesday that the Iran conflict has increased uncertainty about the U.S. economic outlook, and the path ahead for the central bank’s interest rate policy.
Kashkari pointed out that the inflationary effects of such conflicts are unpredictable, which is why he will have to monitor incoming data, he said in an event held by Bloomberg, according to a Reuters report.
When it comes to monetary policy, “we need to see with this new shock, potentially a new shock hitting the global economy...how long is the effect, and how big is the effect?” Kashkari said, per the report.
“If headline inflation is going to be elevated for an extended period of time, coming off of five years of elevated inflation, boy, that's a...scenario that we need to pay close attention to” and how it might affect inflation expectations, Kashkari said, as per the report.
Before the attack on Iran, the president of the Federal Reserve Bank described the economic outlook as generally positive. He reportedly noted that inflation was expected to decline and the job market remained strong, though it was beginning to soften.
Yellen’s Stance
Former Treasury Secretary Janet Yellen has also reportedly stated that the Federal Reserve faces a complex task on rate cuts, since the ongoing impact of the Iran conflict on the oil market could slow U.S. economic growth, and drive up inflation.
“I think the recent Iran situation puts the Fed even more on hold, more reluctant to cut rates than they were before this happened,” Yellen said via video to a conference in Long Beach, California, on Monday, according to Bloomberg.
Fed’s Latest Stance
The Federal Reserve kept its benchmark interest rates unchanged in the first Federal Open Market Committee meeting of 2026 in January.
The FOMC minutes from its January’s meeting showed the possibility of a rate hike if inflation remains at above-target range.
U.S. equities were mixed on Tuesday. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down by 0.8%, the Invesco QQQ Trust ETF (QQQ) slumped 1%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) fell 0.7%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘neutral’ territory.
For updates and corrections, email newsroom[at]stocktwits[dot]com.<
