Minneapolis Fed President Neel Kashkari said on Monday that while the benchmark interest rate is at its highest level in more than two decades, it is not hurting economic growth, so policymakers can wait and see for a while before deciding whether a rate cut is needed.

"At least through the post-pandemic recovery, the neutral policy rate has risen, giving the Federal Open Market Committee time to complete its review of economic data before making a decision to cut rates and reducing the risk that policy will tighten too much," Mr Kashkari wrote on the bank's website.

Essentially, what looks like tight monetary policy is no longer so, given the history of the past 15 years or so, meaning that nominal interest rates can stay higher for longer without hurting the economy.

Kashkari wrote: "These economic data suggest to me that the current stance of monetary policy... Maybe not as tight as we expected."

Mr Kashkari's note is important as the Fed considers when to start, how much to cut rates and how quickly to return to a neutral environment.

A day earlier, Fed Chairman Jerome Powell said almost as much, noting that the central bank had shifted its focus to deciding when to start cutting rates, but that solid economic growth meant officials did not have to rush into that decision.

In the interview, Powell said officials are trying to balance the risk of keeping rates too high for too long, which could cause the economy to slow, with the risk of cutting rates too soon and allowing inflation to rise above the Fed's 2% target.

"There is no easy, simple, obvious path," Powell said. We think the economy is in good shape. We think inflation is coming down. We just want to get a little more confidence that inflation is coming down in a sustainable way."

Although economists last year widely expected the U.S. economy to fall into recession, the preliminary estimate of real GDP growth in the fourth quarter was 3.3 percent on an annualized basis, thanks to strong consumer spending, and the economy will grow 2.5 percent for all of 2023.

Just Monday, the Organization for Economic Cooperation and Development (OECD) raised its forecast for global GDP growth to 2.9 percent from 2.7 percent projected in November, and sharply raised its forecast for U.S. GDP growth to 2.1 percent from 1.5 percent.

The OECD sees U.S. inflation at 2.2 percent in 2024 and slowing further to 2 percent in 2025, the central bank's inflation target and the lowest among G7 nations.

As a result, Kashkari noted that inflation is "moving rapidly" toward the Fed's 2 percent target, thanks to improvements in the supply of labor, goods and services. He added that while there may be some signs of economic weakness, the overall picture right now is one of continued growth and low unemployment, rather than an economy under pressure from the effects of the Federal Reserve's high-interest rate policy.

However, on the same day, Chicago Fed President Goolsbee claimed that he did not want to rule out the possibility of a rate cut in March, but needed to see more data to show progress in the fight against high inflation, and would not speculate on the possibility of a 50 basis point rate cut by the FOMC.