Fed's Kashkari (2026 voter) says inflation is too high; huge question mark about how long Hormuz Strait will be closed and that will have a big effect on inflation

• Before Iran conflict had some confidence inflation was heading back down to 2%.
• Labour market moving sideways, "Lukewarm"; looks like it's hanging in there.
• Iran shock has upended inflation environment.
• Even if the Hormuz Strait reopens, it will be months before supply chains return to normal.
• Not surprised by headline inflation rise, what matters is how persistent strait closure is.
• Fed Chair has a lot of influence.
• Fed Chair will have to persuade other policy makers.
• Dead serious about getting inflation back down.

Kashkari's comments underscore a significant concern about inflation, particularly in the wake of geopolitical tensions affecting supply routes. His emphasis on the closure of the Hormuz Strait suggests that even a reopening may not quickly alleviate inflationary pressures, which complicates the Fed's policy outlook. This could point towards a more cautious stance from the central bank, with potential implications for interest rates and the broader market's inflation expectations.