Fed's Goolsbee: Uncertainty means Fed will hit a slower pace of cuts
|Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee noted on Thursday that while the Fed is on pace to achieve its inflation and employment targets, there is still some room to move on inflation before victory can be claimed. Inconsistent messaging from the US White House about trade tariffs is complicating the Fed's view of the future, and despite overall progress on achieving the Fed's mandate, Fed policymaker Goolsbee noted that uncertainty about trade will force the Fed into a wait-and-see stance for far longer than it otherwise would have.
Key highlights
It seems the job market is settling in at full employment.
My view of the economy is full employment, ongoing growth, and inflation likely to fall to 2%.
First-order effect of tariffs on prices may be less important than possible impact on expectations.
Effect of tariffs on inflation may be hard to discern.
I would be most concerned if long-term rates were rising in lockstep with inflation expectations; so far that is not what is happening.
Long-term rates are set by complex market forces, not the Federal Reserve.
I would put special emphasis on things like PPI and industry contacts in monitoring how tariffs might influence prices and inflation.
Tariff impacts will make it more complicated to determine what is overheating, and what is a one-time price change.
The Fed needs to be mindful of overheating and deterioration, but things are largely going well.
The appearance that inflation has stalled is largely due to base effects.
Added uncertainty makes the environment for the Fed foggier, a reason to slow the pace of cuts.
I feel the neutral rate is well below the current fed policy, but it is appropriate to slow the pace of cuts to find a stopping point.
We have to take administration policies as a given.
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.