Fed’s Goolsbee: ‘More months’ needed for good inflation data

Federal Reserve Bank of Chicago President Austan Goolsbee said Friday that he was relieved by this week’s data showing inflation eased in May, but that he would like to see similar data for “a few more months” before cutting interest rates.

“Inflation is back to levels that, if we had a number of months like that, we would feel a lot better,” Goolsbee said at the Iowa Farm Bureau Economic Summit in Ankeny, Iowa. Government data published Wednesday showed consumer prices did not rise at all from April to May.

The data, which showed consumer inflation at its lowest since July 2022, was released in the middle of the Fed’s two-day policy meeting. “I felt a little relieved coming out of the meeting,” Goolsbee said.

The Fed said on Wednesday

kept its policy rate unchanged

in the 5.25%-5.5% range. Fed Chairman Jerome Powell said any rate cuts would wait until the central bank is confident inflation is moving toward the Fed’s 2% target, or there is an unexpected deterioration in the labor market.

Goolsbee said that over the past 18 months, “we have made really big progress in lowering the inflation rate.” He added, “We need to see more progress before we cut rates.”

He said the Fed is also monitoring the health of the economy, where problems such as loan defaults are rising but they are not at the level that would be associated with a recession.

He said that if inflation continues to decline and the Fed can cut interest rates, the Fed may be able to avoid a recession altogether.