Esther George, president and chief executive officer of the Kansas City Federal Reserve Bank.

Christopher Dilts | Bloomberg | Getty Images

Kansas City Federal Reserve President Esther George on Monday cautioned against a “rigid” approach to monetary policy in a post-pandemic era that may involve different inflation and employment dynamics than ones seen in the last few years and worked into the Fed’s current policy framework.

That new framework, emphasizing job generation and faith that the forces that kept inflation low in recent years will continue to do so, has led the Fed to pledge to continue buying $120 billion a month in bonds until the job market improves and to leave interest rates near zero for even longer even as prices begin to rise.

While the bulk of Fed officials suspects those price pressures stem from temporary problems that will ease in coming months, “I am not inclined to dismiss today’s pricing signals or to be overly reliant on historical relationships and dynamics in judging the outlook for inflation,” George said in remarks prepared for delivery to a Kansas City Fed agricultural symposium.

George did not say explicitly that she was ready to change policy or open debate now about when, for example, to start trimming the bond purchases.

But she said the Fed needed to be on guard in case the dynamics that have kept inflation low in recent years change as the economy reopens with a potential flood of spending by families cooped up for a year and sitting on greater savings.

“The structure of the economy changes over time, and it will be important to adapt to new circumstances rather than adhere to a rigid formulation of policy reactions,” she said. “With a tremendous amount of fiscal stimulus flowing through the economy, the landscape could unfold quite differently than the one that shaped the thinking” behind the Fed’s current approach.

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