MNI: Goolsbee Warns Against Fed Staying Tight For Too Long
Chicago President says the economy isn't facing a broad-based overheating of demand.
Chicago Fed President Austan Goolsbee on Thursday said keeping restrictive interest rates for too long risks damaging the job market and downplayed recent stronger-than-expected inflation reports, while declining to say if the FOMC's view of three rate cuts this year is the right path.
"We need to be mindful of how long we want to stay in that posture if, as expected, we see continued progress getting inflation down," he said in the text of remarks he's giving in Oak Brook, Illinois. "If we stay restrictive for too long, we will likely see the employment side of the mandate begin to deteriorate. That’s why it’s worth paying especially close attention to the leading indicators from the labor market for signs of deterioration." (See: MNI POLICY: Fed Won't Hesitate To Ease If Employment Falters)
Inflation progress hit a "bump" in the last two reports but "there does not seem to be a broad-based overheating of demand" he said, cautioning it will be difficult to bring inflation back to target if housing service price gains remain elevated. "Housing inflation remains my most valuable indicator for the immediate future."