MNI: Fed's Goolsbee Says Prices Can Slow Amid Strong Economy

Inflation can slow even in today's strong economy because of progress boosting supply and productivity, and CPI figures released earlier today offer more evidence price gains are moving back to target, Chicago Federal Reserve President Austan Goolsbee said Tuesday

"Growth and employment gains have been so strong that some argue the economy is overheating and inflation is about to roar back. But with the positive supply developments, you can have blockbuster numbers without adding to inflationary pressures," according to an outline of remarks Goolsbee is giving to the Detroit Economic Club.

Inflation may fall by more than an almost unprecedented 4 percentage points this year even with the job market around full employment, Goolsbee said. Besides favorable developments on the supply side of the economy, long-run inflation expectations have remained stable, he said. (See: MNI INTERVIEW: Fed Likely Needs To Do More - Ex-Fed's Giannoni)

"I’m struck by the seeming disconnect between the strong data we are seeing and what we are hearing from our business contacts. Nobody is saying they feel like this is an economy growing at 5%," Goolsbee said.

"My concerns aren’t so much about the economy overheating as they are about external shocks that could throw us off course," as was the case in 1990 and 2001, he said.

The Chicago Fed president also said "we still have a way to go before we reach our 2% PCE inflation target" and "the key to further progress over the next few quarters will be what happens to housing inflation. More generally, there are always some bumps in the road as inflation comes down."

U.S. CPI was basically flat in October, and slowed to 3.2% from 3.7% on the year. Core CPI ticked down to 4.0% from 4.1% a month earlier, the smallest annual rise since September 2021.