Written by Michael S. Derby
NEW YORK (Reuters) – Chicago Fed President Austin Goolsbee is still eyeing a further slowdown in inflation as part of the process that would open the door to lower interest rates.
Goolsbee described himself as “very optimistic that we will see improvement” on the inflation front, and said in an interview with CNBC on Monday that he hopes the central bank will get “more confidence on inflation.” “The Side” Pressures are declining after they were higher than expected at the beginning of the years.
While Goolsbee declined to say anything about the timing of the interest rate cuts, he did say that policymakers need to consider whether the Fed’s high level of short-term interest rates, now between 5.25% and 5.5%, is appropriate for an economy that is starting to… In slowing down. Signs of cooling appear outside inflation.
Extremely tight monetary policy has been implemented because “you’re trying to prevent overheating,” Goolsby explained.
“If jobless claims go up, the unemployment rate slowly goes up, and many other measures have calmed down to something like they were before the pandemic, and you start to see a weakening in consumer spending,” Goolsbee said at that point. It must think more about achieving a balance between inflation and employment.
That’s because “if you’re going to impose additional restrictions for too long, you’re going to have to start worrying about what happens to the real economy” and whether that policy setting slows the economy too much.
At the Fed’s policy meeting earlier this month, officials expected one rate cut for the year, versus three forecasts in March. Markets are currently looking forward to an easing of the federal funds rate in September.