Chicago Federal Reserve Bank President Austan Goolsbee discussed the impact of the Federal Reserve’s interest rate-cutting campaign on “The Claman Countdown.” Goolsbee stated that the Fed’s interest rates have a way to go before reaching a “neutral” rate, and that the central bank should continue to cut rates unless the economy shows signs of overheating.
Goolsbee, who will become a voting member of the Federal Open Market Committee (FOMC) in January, said that policymakers will likely continue with rate cuts until the neutral rate is reached, but the pace may slow if the economy accelerates. He noted that the broad dot plot suggests rates have a fair way to go down before reaching a neutral rate.
Goolsbee echoed Federal Reserve Chair Jerome Powell’s sentiments, stating that the neutral rate is known by its works in the economy. He also cautioned against overinterpreting individual inflation reports, noting that they can be noisy data series with month-to-month moves not necessarily indicating a longer-term trend for the pace of price growth.
Goolsbee’s remarks come after Powell said the central bank is not rushing to cut rates to reach the neutral rate, and that there is no clear way to estimate it. Goolsbee also noted that FOMC policymakers’ forecasts for future ranges of interest rates in the “dot plot” all suggest that interest rates are likely to decline over the next year until rates reach a settling point around what may be the neutral rate.