Austan Goolsbee, the chair of Federal Reserve Bank of Chicago, commented today on US economy and monetary policy. Here are the highlights from his speech.
- The Fed will get to 2%, we should not consider changing the target. The recent rise in productivity does seem to be concentrated in high-technology spaces, which can have a longer runway.
- Rates will be a fair bit lower a year from now. Given how the rest of the economy is behaving, the one outlier is interest rates, which will likely come down over the next year.
- The Fed will have a series of meetings that will be close calls between cutting and not cutting.
- I won't precommit to December meeting decision; still several data points to come, including inflation and consumer spending.
- Overall progress on inflation is still encouraging. Inflation has inched up a bit. I still think the US is on the path to 2%.
- What happens with immigration will have a very significant impact on the size of the coming labor force.
- Measurements like the ratio of vacancies to the number of unemployed people show balance in the job market.
- The labor market appears largely stable. The last few months of jobs numbers feel like a sustainable and full employment place.
- On average, it feels like the job market was cooling from a very hot level to something like sustainable full employment. We want it to stabilize there.
- Consumer delinquencies are not high compared to historic levels. With a more speculative asset that lacks an obvious real economy use case, it is hard to see what the real impacts will be.
- So far, the rise of crypto-based assets has not had much macro impact, but it could have a wealth effect. The speed at which the Fed is moving will probably slow as the debate proceeds on a stopping the point.
- A single month's data is not reliable, but if the household survey were to show steady deterioration, the Fed would have to look at it more closely.
- It is likely that goods prices will return to deflation, services will continue in the right direction, and market data on housing suggests coming improvement there.
- I will be watching interest rate sensitive sectors and the lagged impact of monetary policy for signs that the neutral rate is approaching.
- The outlook does matter, so when the new administration starts proposing policies, the Fed will start to think through it.
Source: xStation5
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