Goolsbee Warns Against Front-Loading Rate Cuts While Inflation Stays Above Target
With the recent Consumer Price Index (CPI) and the Fed’s favorite Personal Consumption Expenditures (PCE) Price Index both on the strong side of the central bank’s 2% target, Goolsbee noted that policymakers “have been burned by assuming transitory inflation” before and can’t afford to make the same mistake twice.
“I feel that front-loading too many rate cuts is not prudent in that circumstance,” he said at the National Association for Business Economics meeting in Washington, D.C. “People express that prices are one of their most pressing concerns. Let’s pay attention. Before we cut rates more to stimulate the economy, let’s be sure inflation is heading back to 2%.”
Those comments are hawkish and don’t sound like they are coming from an FOMC member poised to approve a rate cut in March or June. Currently, the chances of a March rate cut are 4.1%. The chances of a June rate cut stand at 43.9%, down from 50.2% last week.
Goolsbee went on to say that a 3% inflation rate “is not good enough, and it’s not what we promised when the Federal Reserve committed to the 2% mandated target.”
Waller Also Leans Hawkish as Two Fed Voices Put a Floor Under the Dollar
Earlier in the year, Goolsbee had stated that he thinks the Federal Reserve will be able to cut later in the year, but even that is now being questioned.
On Monday, Fed Governor Christopher Waller also leaned toward no cut when he suggested that if the jobs picture continues to improve, that would further lessen the case for cuts.
