Fed’s Goolsbee: Rates could come down if things stay steady and inflation doesn’t spike

Federal Reserve Bank of Chicago President Austan Goolsbee stated in a CNBC interview on Friday that interest rates should decrease if economic conditions remain stable, inflation does not resurge, and full employment is maintained, according to Reuters.

Goolsbee emphasized that the labor market is currently stable at full employment and that wage growth is consistent with the Fed’s 2% inflation target, given productivity levels. He acknowledged that while recent retail gains are promising, further analysis is needed to determine if they reflect a strong holiday season or a broader economic trend.

Goolsbee also expressed concern over the recent rise in long-term interest rates, noting that it’s not solely driven by expected inflation but also by anticipated slower Fed rate cuts and higher-than-expected economic growth.

Goolsbee emphasized that the Fed must carefully consider the potential impact of factors like tariffs and global economic responses on inflation and overall economic stability. While acknowledging that inflation remains elevated, Goolsbee pointed out that this largely reflects the increase seen earlier last year and that there has been recent progress in bringing it down.

He concluded that while the Fed has observed some impact of its restrictive monetary policy on interest-sensitive sectors of the economy, there is currently no evidence of overheating.