Fed’s Goolsbee Expects Interest Rates To Fall With Inflation, Says ‘Golden Path’ Is Possible

    Date:

    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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