CHICAGO — Federal Reserve Bank of Chicago President Austan Goolsbee warned against rushing to cut interest rates, even after voting in favor of the central bank’s first rate cut of the year. Speaking in an interview with CNBC, Goolsbee said inflation remains above the Fed’s 2% target for more than four years, making caution essential in the next policy steps.
Goolsbee noted that the neutral interest rate — the level that balances growth and price stability — should be closer to 3.1%. He suggested that could be reached gradually through two additional rate cuts this year, followed by one reduction in each of the next two years.
At the same time, the Chicago Fed introduced a new tool designed to track the labor market in real time, using 11 separate datasets to monitor unemployment and job layoffs. While the jobless rate currently stands at 4.3%, which he described as historically low, Goolsbee emphasized that recent labor market trends require closer scrutiny.
The Fed official underscored that ensuring labor market stability is just as important as controlling inflation, adding that monetary policy must strike a balance between the two. He also cautioned that keeping interest rates too high for too long could widen the output gap and weigh on economic growth.
Although Goolsbee expressed optimism about modest economic improvement, he warned that momentum could falter if monetary policy is not steered closer to a neutral stance. Such an adjustment, he argued, would provide the balance needed to support both employment and price stability.
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