Chicago Fed Chairman Austan Goolsbee stated on Tuesday that the Fed has made significant progress in reducing inflation to its 2% target, and if this situation continues, attention will shift to how long interest rates will remain at current levels.
In the coming months, we may reach the fastest level of inflation decline in the last century, "Gullsby said in an interview with the broadcasting company CNBC. Therefore, we have made progress in terms of inflation rates“
He said, "As long as we make progress, as I have been saying for some time, the debate about how high interest rates should be will gradually disappear, and as inflation decreases, how long should we keep interest rates at this level
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Chicago Fed Chairman Goolsby
Gullsby has always been cautious about raising interest rates too high and causing too much economic pain in the process. He stated that he does not want to promise in advance whether the Federal Reserve needs to increase borrowing costs at future meetings.
Neil Kashkari, Chairman of the Minneapolis Federal Reserve, delivered a speech on Bloomberg Television in response to Goolsby's commitment to cooling prices, but stated that the Fed's inflation struggle has not yet ended.
Ultimately, the economy will tell us how much it takes to achieve this goal. I just don't know, "Kashkari said, adding that he and his colleagues need to" lower prices within a reasonable time frame.
Gullsby and Kashkari are both voters of the Federal Open Market Committee, which set policies this year. They spoke after the Federal Reserve held its second consecutive meeting to keep interest rates unchanged for nearly a week. Policymakers last week maintained interest rates in the range of 5.25% to 5.5%, setting a 22-year high. Federal Reserve Chairman Jerome Powell hinted that the central bank may complete interest rate hikes.
Two Federal Reserve officials also pointed out that as inflation decreases, real interest rates will rise, and tightening policies may require a rate cut if the impact is too significant.
If we don't retreat a bit, then real interest rates will become increasingly tight, which is true, this is mathematics, "Kashkari said. Although he is encouraged by the ongoing deflation, Kashkari pointed out that economic activity and the labor market are still strong. "I don't see much evidence that the economy is weakening," he said
Gullsby stated that although the economy has been cooling, the unusual aspects of the post pandemic situation may be creating an environment where rapid deflation can occur without stimulating a full-scale recession - what he calls the "golden road".
Gulsby said, "To reduce inflation without a major recession, this has basically never happened." However, due to some strange things at this moment, it is possible to embark on the golden path, that is, we have reduced inflation without an economic recession. "He pointed out that some supply side improvements, such as easing the bottleneck of the epidemic and increasing labor force participation rates, can help prevent a significant weakening of the economy.
