Fed's Goolsbee (2027 voter) optimistic there can be more rate cuts this year, but not until inflation is heading back to target
Importance
Level 1
- 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.
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