Inflation has been so well behaved that some high readings for a few months wonât change the picture, Chicago Fed President Austan Goolsbee said Wednesday.
Because inflation fell so far so fast last year, âeven if inflation comes in a bit higher for a few months, as many forecasts suggest, it would still be consistent with our path back to [the 2%] target,â Goolsbee said, in talk at the Council of Foreign Relations in New York.
âThere is nothing wrongâ with some ups and downs, he added.
On Tuesday, the governmentâs January consumer inflation data came in hot across the board compared with expectations, causing many economists and traders to push their forecast of the Fedâs first rate cut until June or later.
In its January policy statement, the Fed said it did not expect to cut interest rates until it had âgreater confidenceâ that inflation is moving down toward the 2% target.
âWe want to see more good data. Itâs not that weâre looking for better data,â Fed Chairman Jerome Powell explained at his press conference.
In his talk, Goolsbee said more data like that seen over the past six months was âprobably too stringentâ a test.
âI donât support waiting until inflation on a 12-month basis has already achieved 2% to begin to cut rates,â he said.
Goolsbee said he thought the Fedâs benchmark interest rate was so high that it was pushing down growth.
âOur current policy stance is quite restrictive,â he said. This raised the possibility that the economy would slow too much.
âI think itâs worth acknowledging that if we stay this restrictive for too long, we will start having to worry about the employment side of the Fedâs mandate,â Goolsbee said.
Some economists disagree, thinking that the Fedâs benchmark rate is not putting downward pressure on growth. They point out that the economy grew at a strong average growth rate of 4.1% over the last six months of 2023.
Stocks
DJIA
SPX
were higher on Wednesday while the 10-year Treasury yield
BX:TMUBMUSD10Y
slipped to 4.27%.
