Chicago Fed President Goolsbee sees rate cuts depending on inflation progress
Chicago Federal Reserve President Austan Goolsbee discussed the possibility of interest rate cuts in the near future, despite growing risks to the economy. In a recent interview with CNBC, Goolsbee acknowledged the concerns raised by businesses in his region regarding the impact of tariffs on prices and growth.
Goolsbee emphasized the need to wait for clarity on policy issues before making any decisions on interest rates. He noted a shift in conversations with business leaders, who are expressing anxiety and holding back on capital projects due to uncertainties surrounding tariffs and other fiscal policies.
Despite the current wait-and-see approach, Goolsbee maintained his expectation for future rate cuts. He believes that if progress is made on inflation over the long term, interest rates could be lower 12 to 18 months from now.
New York Fed President John Williams also highlighted the high level of uncertainty in economic decision-making, particularly around inflation. Recent data has been sending mixed signals, and policy uncertainty has increased significantly in recent months.
During the Federal Open Market Committee (FOMC) meeting, policymakers decided to keep the short-term fed funds rate steady between 4.25% and 4.5%. Chair Jerome Powell emphasized the increased uncertainty around the economic outlook, using the term “uncertainty” multiple times during the post-meeting news conference.
While there have been concerns about stagflation – a combination of slow growth and rising inflation – Goolsbee clarified that the current economic data does not align with the stagflation of the 1970s. He explained that tariffs could lead to price increases and reduced output, creating a stagflationary impulse.
Market expectations differ from FOMC projections, with investors pricing in the equivalent of three quarter percentage point rate cuts according to CME Group data. Despite the uncertainty and risks in the current economic environment, policymakers remain vigilant and open to adjusting interest rates as needed to support economic growth.
