Fed's Goolsbee (2027 voter) optimistic there can be more rate cuts this year, but not until inflation is heading back to target

• Can't bank on coming productivity to lower inflation or use that as a rationale for rate cuts.
• Inflation progress has stopped, not obvious that Fed policy is even restrictive.
• Need to make more progress on inflation, concerned if it remains stuck above target.
• Core services inflation ex-housing is stubbornly high and need to be vigilant.
• Lowering rates in anticipation of productivity gains could lead to overheating.
• Consumer spending, not AI investment, has been main driver of economic growth.
• Low hiring, low firing fuelled by uncertainty that looks set to continue with supreme court tariff ruling.
• Economic growth and labour market do not seem especially fragile.
• Any discussion of returning to a scarce reserves regime would need to look at the pros and cons.

Fed's Goolsbee suggests a cautious approach to rate cuts, indicating optimism but emphasizing the need for clearer progress on inflation before any monetary easing. His comments imply that current inflation metrics are not supportive of immediate cuts, and stress the importance of monitoring the core services sector closely. This could signal to markets that while rate cuts are on the table, they hinge on significant improvements in inflation, influencing sentiment around future Fed policy and potential market reactions across currencies and equities.