Fed’s Goolsbee Reiterates Case for Extended Path of Rate Cuts

By Michael S. Derby

NEW YORK – Chicago Federal Reserve President Austan Goolsbee emphasized on Monday that he believes there is a strong case for significant interest rate cuts by the U.S. central bank, considering the current economic situation and its potential trajectory.

In an interview, Goolsbee explained that the monetary policy process "is a journey over a year or more to bring the rates down to normal." He indicated that the federal benchmark overnight interest rate needs to decrease more substantially than just 25 basis points in the next 12 months, forecasting that "there’s going to be a lot of cuts." Recent forecasts from the central bank support this perspective.

The Federal Reserve has started what it anticipates to be a continuous series of rate cuts, motivated by decreasing inflation pressures and emerging risks in the job market. Goolsbee noted that the economy has generally stabilized, allowing the Fed to recently reduce its policy rate by 0.5 percentage points to a range of 4.75% to 5.00%.

Goolsbee pointed out some cautionary signs regarding the job market, although he stated that with the unemployment rate currently at 4.2%, it seems to be at a sustainable level.

In light of a potential strike by U.S. port workers, Goolsbee expressed concern about the negative impact an extended shutdown could have on the economy.