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Federal Reserve Bank of Minneapolis President Neel Kashkari stated that the high interest rates are not hurting the economy and could buy more time before deciding on rate cuts in an essay released on the central bank’s website. Kashkari believes that the Fed policy is not as restrictive, meaning rates could remain higher without harming the economy.

The current monetary policy may not be as tight as previously assumed, allowing the Fed more time to assess upcoming economic data before starting to lower the federal funds rate. This is important as the Fed contemplates when to start cutting and how quickly to get back to a neutral setting.

Kashkari’s comments align with those from Federal Reserve Chair Jerome Powell, asserting that the negative effects feared from previous rate hikes have not come to pass. Despite widespread expectations for a recession, U.S. economic growth has remained strong, and inflation measures have eased.

There is no official “neutral rate,” and officials often stress that it can only be estimated but never observed. Kashkari prefers the 10-year TIPS yield, which currently stands at around 1.82%. This, along with other economic data, leads him to question the downward pressure monetary policy is currently placing on demand.

Kashkari also noted that the data is not “unambiguously positive” and will be watching for evidence of economic stress in items such as loan and credit card delinquencies.



Read more: Kashkari backs sentiment that Fed can take time cutting interest rates