As the Chicago Federal Reserve tackles inflation concerns while limiting the impact on the economy, President Austan Goolsbee voiced optimism on Tuesday about the possibility of achieving a soft landing.
In an interview, Goolsbee emphasized the particulars of the current situation and alluded to the possibility of a successful resolution. He said, “Because of some of the strangeness of this moment, there is the possibility of the golden path … that we got inflation down without a recession.” Building on the pattern seen all year, Goolsbee stressed the need to lower inflation while keeping unemployment rates moderate.
After 11 rate hikes, the Federal Reserve decided to hold interest rates steady at its most recent meeting for the second time in a row. Notwithstanding these steps, core inflation—as indicated by the PPI for personal consumption expenditures—continues to be high at 3.7% per year, beyond the Federal Reserve’s target of 2%. Goolsbee noted that reducing pricing pressures was a major accomplishment and that the inflation rate might decline as quickly as it has since 1982.
The economy has shown resilient in the face of tightening measures; the third quarter saw a strong 4.9% annualized growth in the gross domestic product, above forecasts. Goolsbee recognized the difficulties in following the “golden path” in the face of historically high inflationary pressures, pointing out how uncommon it is for such a situation to occur without a significant recession.
Goolsbee echoed recent remarks made by Chair Jerome Powell by emphasizing the central bank’s data-dependent strategy going forward. Speaking at the December meeting, Powell reiterated that the Federal Reserve has not yet made decisions, adding, “The committee will always do what it thinks is appropriate at the time.”