In an interview with CNBC on Friday, Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee said that they are still on a path to get to 2% inflation, adding that it was 'nice' to get an inflation number that's better than expected.
Key takeaways
"There's more uncertainty, noise."
"My projections were for a little more shallow rate-path in 2025."
"Next 12- to 18- months, rates can go down a fair amount."
"Employment is stable, want to keep it stable, to do so rates need to come down to something like neutral."
"I agree policy rate is meaningful restrictive."
"I agree policy rate is still far from neutral rate."
"We are significantly less restrictive than we were."
"Our job is to think through scenarios, though we don't know what new administration will propose."
"Uncertainty on policy is part of why I feel rate-path next year is a bit more shallow."
"Rates will come down by a judicious amount next year."
"Rate path will be determined by employment, prices."
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD remains side-lined around 1.0480
Price action in the FX world remains mostly subdued amid the lack of volatility and thin trade conditions following the US Presidents' Day holiday, with EUR/USD marginally down and flat-lined near 1.0480.
GBP/USD keeps the bullish bias above 1.2600
GBP/USD kicks off the new trading week on a positive foot and manages to reclaim the 1.2600 barrier and beyond on the back of the Greenback's steady price action.
Gold resumes the upside around $2,900
Gold prices leave behind Friday's marked pullback and regain some composure, managing to retest the $2,900 region per ounce troy amid the generalised absence of volatility on US Presidents' Day holiday.
Five fundamentals for the week: Peace talks, Fed minutes and German election stand out Premium
US President Donald Trump remains prominent, especially in a week when high-level peace talks kick off. Nevertheless, the Commander-in-Chief competes with the world's most powerful central bank, and other events are of interest as well.
Bitcoin Price Forecast: BTC stalemate soon coming to an end
Bitcoin price has been consolidating between $94,000 and $100,000 for almost two weeks. Amid this consolidation, investor sentiment remains indecisive, with US spot ETFs recording a $580.2 million net outflow last week, signaling institutional demand weakness.
The Best Brokers of the Year
SPONSORED Explore top-quality choices worldwide and locally. Compare key features like spreads, leverage, and platforms. Find the right broker for your needs, whether trading CFDs, Forex pairs like EUR/USD, or commodities like Gold.