Federal Reserve Bank of Minneapolis President Neel Kashkari said policymakers have time to gauge incoming data before lowering interest rates, pointing to shifts in the post-pandemic economy.

“It is possible, at least during the post-pandemic recovery period, that the policy stance that represents neutral has increased,” Kashkari wrote in an essay published on the bank’s website Monday. “It gives the FOMC time to assess upcoming economic data before starting to lower the federal funds rate, with less risk that too-tight policy is going to derail the economic recovery.”

Policymakers have kept rates unchanged since July as inflation has come down at a steady clip. Fed officials have indicated an openness to cutting interest rates this year, though they have signaled they’re in no rush to do so.

Fed Chair Jerome Powell said policymakers will likely wait beyond March to cut interest rates in an interview conducted Thursday with CBS’s 60 Minutes that aired Sunday evening. He reiterated to a broad public audience that Fed officials want to see more economic data to assure that inflation is on a sustainable path to their 2% goal.

Supply-side factors, rather than monetary policy, have done the “heavy lifting” to cool inflation to near the Fed’s 2% target, Kashkari wrote. Evidence for that includes resilient growth and a strong labor market.

That said, interest-rate increases have played an “enormously important” role in keeping long-run inflation expectations low, he said.

Kashkari, who doesn’t vote on monetary policy this year, wrote a series of essays in 2022 and 2023 as the Fed was tightening policy in an effort to cool inflation.

In one published in September, he assigned a 60% chance to the Fed achieving a soft landing. But Kashkari also warned of a scenario in which inflation could become entrenched, forcing the central bank to tighten policy further in order to fully restore price stability.

The personal consumption expenditures index minus food and energy prices — the Fed’s preferred gauge of underlying inflation — slowed to a nearly three-year low of 2.9% in December. On a six-month annualized basis, the metric was up 1.9%, below the Fed’s 2% target.

At the same time, the unemployment rate has remained near a multi-decade low and strong consumer appetite has fueled healthy growth.

“This constellation of data suggests to me that the current stance of monetary policy, which, again, includes the current level and expected paths of the federal funds rate and balance sheet, may not be as tight as we would have assumed given the low neutral rate environment that existed before the pandemic,” Kashkari wrote.

Policymakers and economists have theorized that the neutral interest rate — something that can’t be measured — may be higher now than before the pandemic, effectively meaning that the current fed funds rate is not as restrictive as it would have been before. 

This article was provided by Bloomberg News.