11:53 AM EDT, 05/07/2024 (MT Newswires) -- The recent inflation data have suggested that inflation is possibly "settling" above the Federal Open Market Committee's 2% goal and that monetary policy may not be as restrictive as it appears, Minneapolis Federal Reserve Bank President Neel Kashkari said Tuesday.

"While we saw rapid disinflation in the second half of 2023, that progress appears to have stalled in the most recent quarter," Kashkari wrote in an essay posted on the regional Fed's website. "The question we now face is whether the disinflationary process is in fact still underway, merely taking longer than expected, or if inflation is instead settling to around a 3% level, suggesting that the FOMC has more work to do to achieve our dual mandate goals."

While monetary policy is already restrictive, the economy has not slowed as much as expected, Kashkari said, leading to an argument of how restrictive policy is relative to the so-called neutral federal funds rate that is neither accommodative or restrictive.

"My colleagues and I are of course very happy that the labor market has proven resilient, but, with inflation in the most recent quarter moving sideways, it raises questions about how restrictive policy really is," Kashkari said. "If policymakers and market participants are misperceiving the neutral policy rate, that could explain the constellation of data we are observing."

The FOMC's most recent Summary of Economic Projections put the long-run neutral rate at around 2.6%, compared with the current federal funds rate of 5.25% to 5.5%.

Kashkari next votes on the FOMC in 2026.