Fed's Goolsbee: Fed could return inflation to target without a recession
28.09.2023, 13:39

Fed's Goolsbee: Fed could return inflation to target without a recession

The Federal Reserve (Fed) will return inflation to target and has a chance to do something 'rare' by accomplishing that without a recession, Chicago Fed President Austan Goolsbee said on Thursday, as reported by Reuters.

Key takeaways

"Holding to inevitability that job losses are needed to slow inflation risks a near-term policy error."

"Some analysis shows inflation reaching target soon, without further policy tightening and only a modest slowdown in growth."

"Fed needs to be extra careful of tying policy to historical relationships that may not hold up in the current economy."

"Recent data, with inflation slowing without job losses, have run against past US patterns."

"Long-run inflation expectations are well-anchored, can help lower inflation with less economic pain than previously."

"Importance of expectations and Fed credibility makes proposals to raise the inflation target from 2% quite risky."

"Risks to the outlook include oil prices, slowdown in China, possibility of a protracted US auto strike, or a disruptive government shutdown."

"Housing will be key to continued inflation progress in the next few quarters, with risk that rising home prices could also boost market rents."

"Wages typically lag prices, so short-term movements should not be used to predict inflation."

Market reaction

The US Dollar stays on the back foot following these comments. As of writing, the US Dollar Index was down 0.3% on the day at 106.30.

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