A U.S. government shutdown or prolonged strike by automotive workers could slow the economy, meaning the Federal Reserve wouldn’t have to use its tools to ease price growth, Minneapolis Fed President Neel Kashkari said.

“If these downside scenarios hit the US economy, we might then have to do less with our monetary policy to bring inflation back down to 2% because the government shutdown or the auto strike may slow the economy for us,” he said in an interview Wednesday on CNN. “I’m not hoping for that, but there’s an interaction there.”

In a letter published online Tuesday, Kashkari — who votes on monetary policy this year — outlined two scenarios for the Fed’s inflation response. In one, to which he assigned a 60% chance, the US central bank can bring inflation down to its 2% target without causing severe damage to the economy. In the other, price growth would be more entrenched and require further rate increases to bring price growth under control.

“If our interest-rate increases are not slowing the economy the way that we expect, then there is that risk that we might have to go higher,” he said on CNN.

Kashkari earlier this week said he is one of 12 officials who sees another rate increase likely being needed this year. The other seven saw the Fed holding rates for the remainder of 2023, according to projections released after last week’s meeting.

In a separate interview Tuesday on CNBC, Kashkari said he sees rates staying flat in 2024 after another increase this year.

“If we have to keep rates higher for longer it’s because the economic fundamentals are even stronger than I appreciate and the flywheel is spinning,” Kashkari said on CNBC. “It isn’t obvious to me that that means that a recession is more likely, it just might mean that we need a higher rate path to get inflation back down to 2%.”

Officials last week left their benchmark interest rate unchanged in a range of 5.25% to 5.5%, the highest level in 22 years, and signaled rates will need to stay higher for longer to contain inflation.

The personal consumption expenditures price index, the Fed’s preferred inflation gauge, rose 0.2% in July, posting the smallest back-to-back monthly increases since late 2020. The core PCE price index, which strips out the volatile food and energy components, also rose 0.2% in July for a second month, underscoring the progress the Fed has made in taming prices.

This article was provided by Bloomberg News.