© Reuters. Fed’s Goolsbee Says More Data Needed to Determine Next Interest Rate Move
(Bloomberg) — Federal Reserve Bank of Chicago President Austan Goolsbee said it’s too soon to say whether policymakers should raise rates or hold them steady in July, but said inflation remains well above target and has proved more persistent than expected.
While some measures of inflation have improved, other categories aren’t coming down as quickly as anticipated, he said.
“The thing that everybody should put their eye on in the immediate term is, are goods prices, inflation, is it too high for one-off reasons — like used cars were especially high but that’s going to go away — or is there something more persistent?” Goolsbee said Friday in an interview on Fox Business. “That’s the key.”
Policymakers held interest rates in a rage of 5% to 5.25% at their June 13-14 meeting, pausing their rate-hike campaign after 10 consecutive increases over the past 15 months. At the same meeting, officials lifted their projections for how much more tightening may be in the pipeline this year and now expect two further increases.
The Fed’s preferred measures of US inflation cooled in May and consumer spending stagnated, suggesting the economy’s main engine is starting to lose some momentum.
Read More: US Inflation Cools, Spending Stagnates as Economy Loses Steam
Goolsbee, who votes on policy decisions this year, said he hadn’t yet made up his mind about what officials ought to do at their July 25-26 gathering.
“We’re going to get a lot of data over the several weeks before the next meeting,” he said. “I just think we’ve got to watch that and think it through.”
The Fed is trying to further cool inflation, which has come down from a peak last year but remains far from the central bank’s 2% goal, but also allow time for its aggressive policy to work through the economy. It is also assessing how much recent banking turmoil will impact credit conditions, which could add to the tightening of financial conditions.
The decision to forgo another hike in June was a “close call” Goolsbee said last week, though the Chicago Fed chief has emerged as one of the Federal Open Market Committee’s most dovish members.
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