Fed's Goolsbee: Current rate policy too tight for economy
Recasts first paragraph, adds comments from Bloomberg interview in paragraphs 6-9
By Michael S. Derby
Aug 23 (Reuters) -Federal Reserve Bank of Chicago President Austan Goolsbee said on Friday monetary policy is quite tight and is no longer aligned with current economic conditions, although he declined to provide specific guidance on what lies ahead for it.
"I usually don't like saying, tying our hands before a meeting, but I've been saying for some time, if you take the level of tightness" now seen in the Fed's interest rate target, "you only want to be that tight on purpose if you're trying to cool an overheating economy, and this is not overheating," Goolsbee said in a CNBC interview.
Goolsbee spoke on the cable television network after a speech earlier in the day from Fed Chairman Jerome Powell, who clearly signaled the time of Fed rate cuts is fast arriving amid falling inflation pressures and rising risks to the job market.
Financial markets broadly expect a quarter percentage point cut in what is now a 5.25% to 5.5% federal funds rate next month, and some believe it could be half percentage point move if August job data, to be released in early September, shows unexpected levels of weakness.
As Goolsbee hinted he's likely down for rate cuts, he also noted "by almost all measures, the job market is cooling" as inflation continues to move back to 2%, a level he believes is achievable. Goolsbee also said there are "warning lights" in parts of the jobs market.
In a separate interview with Bloomberg's television channel, Goolsbee noted that central bank forecasts released in June clearly showed the path officials favored then was toward lower rates, and nothing that's happened since then argues against that outlook.
"What will warrant the speed at which we cut rates, or how much we pause on the cutting, will be determined by how "the economy performs, Goolsbee said.
He also argued against getting hung up about the tactics of easing, saying "I don't think it makes sense to get into a big debate" over 25 basis points versus 50 basis points, saying "little gradations like that aren't what matters the most. What matters the most" is the longer-run path of policy.
Goolsbee also said Powell's comments on the rate outlook "seemed pretty definitive."
Reporting by Michael S. Derby; Editing by Aurora Ellis and Jonathan Oatis
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
