Minneapolis Federal Reserve President Neel Kashkari said Friday he has changed his outlook and now expects that one interest rate increase will be necessary this year.

In remarks just over a week after the Federal Open Market Committee voted to hold its benchmark rate steady, Kashkari said he sees a hike as likely this year as the economy continues to feel the hit from spiking inflation tied to fighting in the Middle East and other factors.

“In March, I had penciled in one rate cut by the end of the year. In June, I’ve changed that to one rate hike by the end of the year,” the policymaker said during a panel discussion at the Aspen Ideas Festival. “It’s a pencil, and so we’re going to have to see how the data comes in.”

A Commerce Department report earlier this week showed that the headline inflation rate as gauged by the Fed’s preferred measure rose to 4.1%, the highest since April 2023. Stripping out food and energy costs, core inflation was at 3.4%, also marking a high since October 2023.

Inflation has been above the Fed’s 2% goal for five years.

Kashkari said his approach to rates has shifted as he remains skeptical that the energy price-induced cost surges will abate soon as unease continues in the Middle East. President Donald Trump charged Friday that Iran has violated a ceasefire agreement.

“I don’t trust Iran to honor whatever agreement has been made,” he said. “There’s some evidence of overnight that they’re already reneging on it, so I certainly am not seeing all clear coming out of the Middle East, and that makes me cautious about feeling too good that the worst is behind us.”

While much of the inflation surge has been blamed on oil prices, Kashkari cited other factors.

“The inflation is being driven by supply dynamics, so whether it’s tariffs pushing up the price of goods that we buy from abroad, it’s the fertilizer that’s been disrupted because of the Strait of Hormuz and energy and oil prices from the Strait of Hormuz,” he said. “Then it’s also being driven by massive investment, hundreds of billions of dollars a year into data centers and all of the associated infrastructure that goes with that. Anything that touches those sectors, the prices are skyrocketing on those parts of the economy.”

Early comments from policymakers coming out of the Fed meeting suggest mixed views on the FOMC, of which Kashkari is a voting participant this year.

On Thursday, New York Fed President John Williams said he expects inflation to ease and he sees current policy well-positioned for current dynamics. At the same time, Chicago Fed President Austan Goolsbee told CNBC that he remains concerned about inflation but declined to speculate on where he sees rates heading.

Correction: Kashkari’s remarks were delivered Friday. An earlier version misstated the date.