Austan Goolsbee, president of the Federal Reserve Bank of Chicago, stated that it is premature to declare triumph in the central bank’s battle against inflation; rather, incoming economic data will inform decisions regarding interest rate cuts.
“We’ve made significant strides in 2023, but I caution everyone that our work is far from complete,” Goolsbee said in an interview with CBS’s Face the Nation on Sunday. Accordingly, the trajectory of rates will be determined by the data.
Goolsbee has been more optimistic than the majority of policymakers regarding the likelihood of a soft landing for the US economy, praising this year’s inflation progress while observing that it remains well below the 2% target set by the Federal Reserve.
“We must reduce inflation to the target level,” he stated on Sunday. It is premature to “count our chickens” until we are certain that we are making progress in that direction.
Following the Federal Reserve’s meeting on December 13, policymakers maintained interest rates unchanged for the third consecutive day and signaled their intention to reduce rates three times in the coming year, according to their median rate forecast.
In addition, Chair Jerome Powell stated that rate cuts were a topic of conversation among officials at the meeting, which sparked a market rally. Bond yields plummeted, stocks set new lows, and investors priced in even more cutbacks for the following year than they had initially anticipated.
On Friday, two Federal Reserve officials attempted to mitigate market expectations by stating that it was premature for policymakers to consider reducing borrowing costs.
“We are not really discussing rate cuts,” New York Fed President John Williams stated on CNBC, adding that it was “premature” to discuss a cut in March.
The Wall Street Journal reports that Goolsbee did not rule out the possibility of a rate cut in March on Friday. He stated in a Friday interview with the news organization that the risks are becoming more balanced, suggesting that attention may need to start to shift toward the Federal Reserve’s mandate to promote maximum employment.
