In an essay published on Monday, Minneapolis Federal Reserve President Neel Kashkari argued that a possibly higher neutral rate means that the Fed can take more time to assess upcoming data before beginning rate cuts with less risk to the recovery, per Reuters.
Kashkari added that a higher neutral rate means monetary policy may not be as tight as thought and noted that core inflation is making rapid progress towards the Fed’s target.
He said that interest sensitive sectors of the economy are holding up well but acknowledged that there are some signs of weakness, including rising consumer delinquencies.
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