Fed’s Goolsbee Repeats Rates Must Fall by ‘A Lot’ Over Next Year

Catarina Saraiva
2-min read

(Bloomberg) -- Federal Reserve Bank of Chicago President Austan Goolsbee reiterated interest rates need to come down over the next year by “a lot.”

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Goolsbee emphasized how the central bank’s narrow focus on inflation has expanded to the jobs market, adding he’d like to keep the unemployment rate — currently at 4.2% — from rising any further.

“Inflation is coming down and is close to target, unemployment has come up and the job market is basically where we would want it to be,” Goolsbee said Thursday in an interview on WBEZ, Chicago’s public radio station. “Rates need to come down over the next 12 months by a lot.”

Policymakers cut interest rates by a half percentage point at their meeting last month, lowering them for the first time since the onset of the pandemic. The larger-than-normal move was meant to bolster the labor market, where the pace of hiring has slowed in recent months. Inflation, which rose to a four-decade high two years ago, has cooled substantially and is near the Fed’s 2% goal.

Fed watchers are now turning their sights to policymakers’ November meeting. While forecasts released last month signaled officials are likely to opt for smaller, quarter-point cuts at the central bank’s last two meetings this year, the size of any reduction will depend on how the economy evolves.

A jobs report due Friday will shed more light on the health of the labor market.

Goolsbee also commented on the strike by US dockworkers at ports on the East and Gulf coasts. He said retailers and manufacturers have about two weeks of product stockpiled, noting that a strike longer than that will begin to have more of an impact on the economy.

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