Chicago Federal Reserve President’s Rate-Cutting Outlook

(Reuters) – Chicago Federal Reserve President Austan Goolsbee stated on Friday that he now projects a shallower rate-cutting path in 2025 than previously expected. However, he still believes the U.S. central bank’s policy rate will decrease by a “judicious amount” next year.

> “The uncertainty about policy makes it particularly hard to estimate what the neutral rate is and what the inflation rate is in particular,” Goolsbee told CNBC. “And so that’s part of why I’m a little shallower” on the rate path for 2025. He noted that inflation appears to be trending toward the Fed’s 2% target.

With the policy rate significantly above its expected stopping point of around 3%, Goolsbee explained that falling inflation will require the Fed to lower it “a fair bit” over the next 12 to 18 months.

Goolsbee had previously suggested that rates would need to decrease by 100 basis points next year, in alignment with the prior views of his fellow policymakers. Recent projections, released following the Fed’s quarter-point rate cut to the 4.25%-4.50% range, indicate that most U.S. central bankers anticipate only 50 basis points of cuts next year.