Chicago Federal Reserve President’s Views on Inflation

(Reuters) – Chicago Federal Reserve President Austan Goolsbee stated that the inflation data released on Friday was slightly better than expected, providing him assurance that inflation is trending towards the 2% target. He anticipates that the U.S. central bank’s policy rate will be “a fair bit” lower in 12 to 18 months.

However, in an interview with CNBC, Goolsbee raised concerns about policy uncertainty, particularly regarding the tariffs that President Donald Trump plans to impose on trading partners such as Mexico and Canada starting Saturday. He noted, “If it affects prices, it affects us… our signal is getting a little muddied when things are happening that drive up prices.”

Goolsbee aligns with Fed Chair Jerome Powell’s viewpoint, expressed on Wednesday, that there should be “no hurry” in implementing further cuts due to the need for more progress on inflation. This statement followed the central bank’s decision to maintain its benchmark interest rate in the current 4.25%-4.50% range.

Though tariffs may lead to a one-time increase in prices that doesn’t necessarily trigger a policy response, Goolsbee indicated that the challenge lies in determining which portion of inflation monetary policy should address, especially if policies collectively raise prices.

Goolsbee also mentioned that auto executives have expressed concerns about the potential effects of tariffs on their prices and profit margins. He emphasized, “And we do have to work these through before we can express confidence on where we are on the underlying economy.”