Chicago Fed's Goolsbee still sees inflation coming down in the 'longer arc'
Austan Goolsbee, president of the Federal Reserve Bank of Chicago, stated his views on the current financial landscape in a recent statement. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, has stated that supply-side improvements in 2023 have helped keep the economy strong and unemployment low, despite the Fed's interest-rate at a 22-year high. Despite some bumps in January and February, Goolsbees believes inflation is still coming down, with core PCE inflation gauge at 2.8% in February. He believes there is still room to get 2% inflation if housing inflation comes down, which could threaten the Fed’s price target. He also noted that wage growth is not a good indication of price inflation.
Published : a month ago by SA News Editor, Liz Kiesche in Finance
Supply-side improvements in 2023 helped contribute to help keep the economy strong and unemployment low even as the Federal Reserve's interest-rate was at a 22-year high, Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said on Thursday.
In discussing the Fed's campaign to bring down post-pandemic inflation, the central bank wanted to get PCE inflation to 2% and it rose to almost to 6%. "We've worked it back... it's clear inflation is well down from its peak,." Goolsbee said. Note that core PCE, the Fed's preferred inflation gauge, stood at 2.8% in February.
"There is room to get us there [2% inflation], if housing inflation comes down," he said. Watch price data, not employment data or GDP growth, to see what's happening with inflation. That's the "more evidence" he needs to become convinced that inflation is sustainably heading toward 2%, which would allow the Fed to make its first rate cut. (Added at 1:31 PM ET).
There were some bumps in January and February. "If you look at the broad-based economy, it doesn't look like broad-based overheating," he said. "I think if you take a longer arc, inflation is still coming down."
"Services...we've seen some improvement, but there's a way to go. Housing inflation is down a little from its peak, but it's way above where it was before the pandemic."
Goolsbee said he's personally watching housing. "It has to come down." He thinks it will, but if it doesn't it would be a threat to the Fed's price target.
Wage growth is not a good indication of price inflation, he contended.
Topics: Markets, Inflation