Global Courant
Chicago Federal Reserve President Austan Goolsbee said Friday that he is confident that inflation can be tamed without a recession, even with additional rate hikes possible.
Speaking to CNBC after the release of the June Nonfarm Payroll Reporthe said continued job growth is part of the Fed’s “golden path” to restore price stability without taking the economy by storm.
“The Fed’s main goal right now is to get inflation down. We’re going to do that, and that would be a triumph without a recession,” Goolsbee told CNBC’s Steve Liesman during a “Squawk on the Street” interview. . “That’s the golden path, and I feel like we’re on that golden path. So I hope we keep postponing the recession forever. Let’s never have a recession again.”
Economists, including those working at the Fed, see credit contraction leading to at least a modest recession later this year or early 2024.
However, one of the most important wheels of the economy, the job market, is showing only mild signs of slowing down. Payrolls grew by just 209,000 in June, below Wall Street estimates, but an unemployment rate of 3.6% points to a resilient economy.
“Overall, the job market is excellent and returning to balanced, sustainable levels,” said Goolsbee.
However, inflation has remained stubbornly high and well above the Fed’s 2% target.
After the June meeting, a large majority of Federal Open Market Committee officials indicated in their updated quarterly projections that they expect at least another two-quarter percentage point rate hikes before the end of 2023. While Goolsbee said he is confident inflation is easing, he also sees more tightening as likely.
“The consensus of almost all FOMCs in the projections is that we’re going to have one or two more hikes this year. I haven’t seen anything to say that’s wrong,” he said. “That’s on the golden path where we bring inflation back to something like our target and we’re doing it without a recession.”
Fed policy is seen as working on a lag, meaning that the 10 rate hikes since March 2022 probably haven’t worked through the economy yet. Goolsbee said at the July 25-26 FOMC meeting he is not sure if he will hike.
“Some modest increases are coming, but we’ve done a lot of work and now we’re waiting for the impact,” he said.
