Chicago Federal Reserve Bank President Austan Goolsbee on Monday said the U.S. central bank is “walking the line pretty well” on bringing inflation down without causing a recession, and will watch the data as September approaches to judge if more monetary tightening may be appropriate.
“There is nothing off the table, there is nothing specifically on the table” as far as a September decision on interest rates, Goolsbee told Yahoo Finance in his first interview since voting with his colleagues to raise the policy rate last week.
“Let’s not tie our hands. ... So far we’ve gotten inflation down without a recession and indeed without even raising the unemployment rate, a thing that many economists said was literally impossible,” he said.
The Fed last week raised rates for the 11th time since March 2022, taking the benchmark overnight interest rate to the 5.25 per cent-5.50 per cent range, a level last seen just before the 2007 housing market crash. Fed Chair Jerome Powell said the rates decision at the next meeting in September would be “live” and would depend on the data, a view that Goolsbee did not contradict on Monday.
Still, the Chicago Fed president signaled his belief that the Fed is now on what he calls “the golden path” of bringing down inflation without causing a recession.
Excess credit tightening after the March bank sector stress appears to have been the “dog that has not been barking,” he said, noting that the tightening in credit conditions he has seen is in line with what should be expected given the sharp rise in the Fed’s policy rate over the past 16 months.