US Federal Reserve Bank of Chicago President Austan Goolsbee on Thursday described the latest US inflation data as “excellent,” adding that the figures provided the evidence he had been waiting for to be confident the US central bank is on a path to its 2 percent goal.
Goolsbee declined to offer guidance on the timing of the first interest rate cut. Still, he emphasized the importance of the deceleration in shelter inflation in the past few months, calling it “profoundly encouraging.”
He has been closely watching that category to determine when the US Fed should lower borrowing costs.
Photo: Reuters
“The committee put out a statement saying, we would not anticipate cutting rates until we were more convinced we’re on a path to 2 percent,” Goolsbee told reporters. “My view is this is what the path to 2 percent looks like.”
Goolsbee’s comments follow a report earlier on Thursday that showed the consumer price index rose 3 percent from a year ago last month, a slowdown from 3.3 percent in May and the slowest pace since August 2021.
The slowdown was partly driven by a long-awaited cooling in housing costs, a component Goolsbee has said would be key to achieving the Fed’s inflation goal.
Following the data, which showed disinflation across a variety of categories, investors all but cemented bets that the Fed would cut rates at a meeting in September.
Policymakers are to meet on July 30 and 31.
Goolsbee, who is to vote at the Fed’s meeting later this month as an alternate member of the US Federal Open Market Committee, said that by not adjusting rates, the central bank is effectively tightening policy.
“The reason to tighten in real terms would be if you thought the economy is overheating,” he said. “This is not, in my view, what an overheating economy looks like.”
Two other policymakers also spoke following the latest consumer price index data.
San Francisco Fed President Mary Daly said that given recent data on employment and inflation, some adjustment to interest rates would likely be warranted — although she stopped short of offering a specific timeline for cuts.
St Louis Fed President Alberto Musalem said that he needed some more convincing to lower borrowing costs.
Musalem said that the CPI figures pointed to “encouraging further progress towards lower inflation,” but he would like more evidence of easing price pressures.
While Goolsbee’s comments signal that he is ready for a rate cut soon, he said he probably would not dissent in favor of one at the meeting this month should his fellow policymakers vote to hold rates unchanged.
Goolsbee said he is open to one rate cut followed by a pause or a series of reductions, underscoring the path of interest rates would depend on the inflation data.
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