Federal Reserve Bank of Chicago President Austan Goolsbee said data showing slower U.S. inflation is “fabulous news” but he hasn’t yet decided on whether to support pausing interest-rate increases at the next policy meeting.
“I haven’t made up my mind for what should happen in September,” Goolsbee said Monday in an interview on Yahoo! Finance. “But this golden path — which so far, we’re sticking on that line — that would be a triumph, and it’s certainly a possibility at this point,” he said, referring to being able to get inflation to the Fed’s goal without triggering a recession.
Goolsbee, a voter on monetary policy this year, said the Fed will have to “play by ear” on whether the policy rate is sufficiently restrictive.
“We’ll get several more major data points before the next meeting,” he said. “But it’s looking like we’re walking the line pretty well.”
The Fed raised interest rates by a quarter percentage point at its July 25-26 meeting, bringing the fed funds rate to a range of 5.25% to 5.5%, the highest level in 22 years. Policymakers have slowed the pace of increases after aggressively tightening rates to bring down inflation that last year reached a 40-year high. This month’s hike followed a pause at the June meeting.
A report Friday showed the Fed’s preferred inflation gauge, the personal consumption expenditures price index, rose 3% from a year earlier in June, the smallest increase in more than two years. Core prices — which exclude food and energy and are regarded as a more reliable signal of underlying inflation — advanced 4.1%, also the least since 2021 and slower than estimated.
Other reports last week showed the U.S. economy grew at a stronger-than-expected pace in the second quarter, and that labor costs cooled in the period, while consumer spending remains robust.
The U.S. economy’s resilience, especially in the face of significant tightening by the Fed, has driven staff economists at the central bank and some of their private-sector peers to remove calls for a recession from their forecasts.