Chicago Federal Reserve President Austan Goolsbee said Saturday that last week’s inflation data was “bad news” for the U.S. central bank, implying that the institution must proceed cautiously with interest rate cuts until inflation begins to ease.
“We need to get some assurance that we’re going to get back to the 2 percent inflation target,” Goolsbee said on Fox News’ “The Journal Editorial Report,” referring to last week’s data showing that the personal consumption expenditures price index, the Fed’s preferred measure of inflation, rose to an annual rate of 3.5 percent in March.
Goolsbee noted that inflation is accelerating even in the services sector, which is largely insulated from the impact of tariffs and rising oil prices due to the U.S.-backed trade war with Iran.
The composition of inflation now “doesn’t look good,” said Goolsbee, who doesn’t have a vote on interest rate policy this year but opposed a Fed rate cut in December because of what he then considered growing inflation risks, which have intensified in recent weeks as oil prices have risen. At its meeting last week, the Fed held rates steady at 3.5-3.75 percent, in an 8-4 vote, the most divided since 1992. Three of the dissenting votes objected to the wording indicating that the Fed’s next move would most likely be a rate cut.
Goolsbee said the split decision highlights the potential difficulties in providing “forward-looking guidance” on the path of monetary policy, which in this case led to three dissenting votes from officials who supported the actual rate decision at the meeting.
When asked about current Federal Reserve Chairman Jerome Powell’s decision to remain as governor after the Senate confirms his successor, Kevin Warsh, in the coming weeks, Goolsbee said he is happy to have Powell’s continued input and is “excited” about Warsh’s arrival.
“I like him very much. I’m glad he’s moving into a governor position, but I’d like him to stay on. He’s been prudent and insightful,” Goolsbee said. Regarding Warsh, he commented that he is “excited about his arrival and to see what impact he’ll have.”
Source: jornada
