MNI BRIEF: Fed’s Goolsbee - Policy Becoming Too Restrictive

MNI (WASHINGTON) - Chicago Fed President Austan Goolsbee said Monday Federal Reserve policy might be overly restrictive as rates stay at 23-year highs but inflation keeps falling. 

“If we are not overheating, we should not be tightening our restrictiveness in real terms. If inflation is falling, us staying at the same rate is tightening,” Goolsbee said in an interview on CNBC. “The real funds rate is as high as it’s been in a long time." 

Still, he suggested market turbulence and a sharp spike in pricing of Fed rate cuts might be overdone, and could be related to market effects following the Bank of Japan’s rate hike last week. 

“As you see jobs numbers come in weaker than expected but not looking yet like recession you want to be forward looking for where the economy is headed for making decisions,” he said. “It’s the market’s job to react and it’s the Fed’s job to act. One of those moves with a lot more volatility than the other." (MNI INTERVIEW: Fed Well-Placed For Sept Rate Cut-Weinberg)