Federal Reserve Bank of Chicago President Austan Goolsbee has urged caution when it comes to monetary policy, citing high levels of uncertainty due to aggressive trade tariffs. In a recent speech, Goolsbee noted that the current state of economic data looks good, but the lag in reporting may not reflect the current situation.
Goolsbee said that while there are signs that the US government bond market is holding up under stress, he prefers to wait-and-see how these factors resolve themselves. The bar for action on monetary policy is higher now, as central bankers assess the impact of President Trump’s trade policies on inflation and growth.
Tariffs, even after being partially reversed, remain high and will have a significant impact on the economy. Goolsbee emphasized that there is no generic playbook for how a central bank should respond to import taxes, which create stagflationary shocks.
Despite financial market volatility, Goolsbee sees the US government bond market remaining a safe haven. He noted that when investors seek safety, long-term Treasuries still feel like the safest asset in the world.
Major banks have forecasted recession and financial markets expect more aggressive rate cuts to support the job market despite inflation above 2%. However, Goolsbee stressed the importance of keeping inflation expectations in check, which helps control current price pressures.
Source: https://finance.yahoo.com/news/feds-goolsbee-rate-cuts-still-175043772.html