ZINGER KEY POINTS
- Austin Goolsbee of the Chicago Fed envisions a ‘golden path’ for the U.S. economy with declining inflation and potential rate cuts.
- Goolsbee emphasizes data-driven decisions, indicating possible easing of restrictive policies if inflation targets are met.
Chicago Fed President Austin Goolsbee highlighted the potential for a “golden path” ahead as inflation trends downward, paving the way for the Federal Reserve to consider lowering interest rates.
What Happened:
“Inflation has come down a lot,” Goolsbee said in a Friday, Jan. 19 interview with CNBC.
Significant progress was made in 2023 toward achieving the dual mandate of the Federal Reserve, he added, citing how maximum employment and inflation converged toward their target levels.
“That’s the thing that everybody should be watching for — the rate path,” he stated. This reduction in inflation is a crucial indicator of the Fed’s decision-making process.
Goolsbee stressed that the key to determining the timing and extent of interest rate cuts lies in the data. “It’s fundamentally all about the data, we don’t want to pre-commit to rate cuts, before the job is done,” the Fed official stated.
Goolsbee emphasized that the Federal Open Market Committee (FOMC) operates on a meeting-by-meeting basis to maintain flexibility in responding to evolving economic conditions.
Goolsbee emphasized his dovish stance when addressing the issue of real policy restrictiveness. He emphasized that as inflation continues to decline, it creates opportunities for nominal rate cuts, as he prefers looking at the real interest rate weighing on the economy.
Housing
Goolsbee noted, “[Housing inflation] should come down.”
The Chicago Fed President foresees a better ground of growth and inflation outlook for U.S. the economy, stating that the job market has come to a better balance.
Markets are currently assigning a 52% probability of a rate cut in March, and are factoring in a total of 142 basis points of cuts by December 2024, according to CME Group Fed Watch tool.
Goolsbee won’t be a Federal Reserve Open Market Committee (FOMC)’s voting member in 2024.
| 2024 FOMC Voting Members | Designation |
|---|---|
| Jerome Powell | Chair |
| John Williams | Vice Chair, NY Fed |
| Michael Barr | Board of Governors |
| Michelle Bowman | Board of Governors |
| Lisa Cook | Board of Governors |
| Philip Jefferson | Board of Governors |
| Adriana Kugler | Board of Governors |
| Christopher Waller | Board of Governors |
| Loretta Mester | Cleveland Fed |
| Thomas Barkin | Richmond Fed |
| Raphael Bostic | Atlanta Fed |
| Mary Daly | San Francisco Fed |
| Rotating Out | |
| Austan Goolsbee | Chicago Fed |
| Patrick Harker | Philadelphia Fed |
| Neel Kashkari | Minneapolis Fed |
| Lorie Logan | Dallas Fed |
—
Originally Posted January 19, 2024 – Fed’s Goolsbee Expects Interest Rates To Fall With Inflation, Says ‘Golden Path’ Is Possible
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