On Monday (June 2nd) local time, Chicago Fed President Austan Goolsbee indicated that the fundamentals of the US economy are sound and that if uncertainties related to trade policy are resolved, the Federal Reserve could advance the process of cutting interest rates.
Goolsbee said in a public conversation in Davenport, Iowa: “I still believe that if we can get through this volatile period, the Fed’s dual mandate still performs well in my view, and I think w
The “dual mandate” he referred to encompasses the Federal Reserve’s two core goals: achieving full employment and maintaining price stability.
Goolsbee, who holds a vote on monetary policy this year, is known for his dovish stance in the Federal Open Market Committee (FOMC). He pointed out that if the US economy remains in its current state and the Trump administration’s tariff measures are not as aggressive as initially announced, then the Federal Reserve’s policy interest rate “is very likely to drop significantly” within the next 15 months.
He noted that the current labor market remains strong and the latest inflation data also performs well. For instance, the Personal Consumption Expenditures (PCE) price index rose by only 2.1% year-on-year in April.
However, Goolsbee also emphasized that the current inflation data may not yet reflect the impact of tariffs. He said, “Judging from the data released so far, the direct impact (of tariffs) is surprisingly small.” He added that it remains uncertain whether this trend will continue in the next one or two months.
Goolsbee admitted that, given the experience during the COVID-19 pandemic, he was not too bold to assert that the impact of tariffs was only temporary. During the pandemic, the Federal Reserve mistakenly believed that inflation was only a temporary phenomenon, which led to inflation in the United States soaring to its highest level in 40 years. This forced the Federal Reserve to raise interest rates significantly to deal with it.
Since December last year, the Federal Reserve has maintained the target range for the federal funds rate at 4.25% to 4.50%. Policymakers have held their ground at three consecutive interest rate meetings.
The next interest rate decision meeting of the Federal Reserve will be held from June 17th to 18th. According to market futures pricing, investors generally expect the Federal Reserve to keep interest rates unchanged in June and July, and then resume the rate-cutting cycle later this year.
Related Topics:
