Ahead of FOMC Minutes: Fed’s Goolsbee Signals Multiple Rate Cuts Possible if Inflation Hits 2% Target

The U.S. Federal Reserve could implement multiple interest rate cuts this year if inflation continues its downward trend toward the central bank’s 2% target, according to Chicago Fed President Austan Goolsbee. Recent data showing cooler consumer prices in January may not fully capture underlying price pressures, particularly in the services sector, which remains elevated.


January consumer prices rose 2.4% year-over-year, below expectations, while services inflation ran higher at 3.2%. Goolsbee stressed that a sustained path toward the 2% inflation goal is necessary before considering further reductions in interest rates. “If we can demonstrate that inflation is on track to 2%, there is room for additional rate cuts in 2026,” he said, emphasizing the importance of upcoming economic data.


Despite mixed signals, including stronger-than-expected job growth in January and a slight decline in the unemployment rate to 4.3%, the central bank has maintained its policy rate at 3.5% to 3.75%. Policymakers remain cautious, balancing signs of economic resilience with ongoing concerns over price pressures potentially becoming entrenched.


Attention now turns to upcoming Federal Open Market Committee minutes and economic indicators, including the Personal Consumption Expenditures (PCE) price index, which is closely monitored for policy decisions. Goolsbee noted that a Fed rate near 3% could become appropriate if inflation continues its decline, potentially requiring two to three quarter-point reductions to reach a neutral stance.


The Fed’s next meeting in March will provide updated economic and interest rate projections, offering clearer guidance on the timing and scale of any potential cuts. Policymakers stress that while inflation is trending downward, confirmation through multiple economic reports is essential before adjusting rates further.