Fed’s Goolsbee says US interest rates are ‘relatively restrictive’
2:16 pm Friday, May 10th, 2024
(Reuters) – Chicago Federal Reserve President Austan Goolsbee on Friday said he believes U.S. monetary policy is “relatively restrictive,” meaning that borrowing costs are putting downward pressure on inflation.
Increased supply, including on the labor side, makes it difficult to interpret if strong job gains and economic growth indicate any worrisome overheating, he said at an event in Minneapolis.
Goolsbee added that he is hesitant to put too much weight on stronger-than-expected inflation in the first quarter of this year, given the substantial progress on inflation seen in 2023.
Incoming data – especially on housing inflation – will determine what the Fed will need to do next with policy, he said.
“There isn’t at this time much evidence in my view that inflation is stalling out at 3%,” Goolsbee said. Housing inflation, though, “remains a significant puzzle and challenge in my view” because it has not declined nearly as quickly as market rents have done, and it is unclear why, he said.
“We’ve been saying for some significant time now, ‘oh, housing inflation is about to come down.’ If that happens at the rate at which we think, I think we will start to see overall improvement, and it will be fairly clear that there’s an optimistic lane that we could ride overall inflation back toward 2%,” Goolsbee said. “If it doesn’t happen, then we’ve got problems.”
(Reporting by Ann Saphir; Editing by Paul Simao)
