(Reuters) – The president of the Federal Reserve of Chicago, Austan Goolsbee, warned Thursday against new decreases in interest rates as long as inflation will remain higher than the target of 2% set by the Central Bank, especially since the labor market shows only slight signs of slowing down.
“I remain fundamentally optimistic and think that we are going to discover that we have not left the right track and that rates can drop,” Austan Goolsbee told journalists after a large rapid event, in reference to an optimal trajectory in which the labor market remains healthy and inflation is close to the 2% target target by the Fed.
The customs duties imposed by the White House on the main trade partners of the United States did not lead to an increase in inflation as important as it was feared, and their impact was mainly limited to the prices of goods, rather than exerting more general pressure on prices, added the central banker.
However, he continues to fear that this happens and calls for caution.
“I want us to be vigilant, and that leads me to think that imposing important budget cuts before knowing if inflation will stop there and before knowing if this inflation will persist a risk of error,” he said.
The Fed has reduced its key rate by a quarter of percentage last week, and although the forecasts of the central bank are leaning in favor of new drops in rates this year, some of its members do not think that a new relaxation is desirable.
According to Austan Goolsbee, the Fed policy has been “slightly restrictive, moderately restrictive”, and not enough restrictive to require rapid relaxation, as said by the new Fed governor Stephen Miran, who said Thursday that the American economy was more vulnerable to shocks due to high interest rates based on unfounded inflationary concerns.
“If excessively restrictive rates pushed the economy towards recession, one might think that the cyclic and sensitive parts of the interest rates of the economy would show it, like a canary in a coal mine,” he said.
“I feel comfortable […] With a gradual reduction while we continue to gather information to ensure that we have not moved away from our goal, “he said.
(Report Ann Saphir; Diana Mandia, edited by Kate Entringer)
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