FED officials emphasized that cautious steps should be taken in interest rate policy in the current economic outlook. Chicago Fed President Austan Goolsbee and Boston Fed President Susan Collins made important assessments on interest rates, inflation and trade tariffs.
Chicago Fed President Austan Goolsbee stated that the course of the economy should be monitored before taking a new step in interest rate policies. “Right now, the Fed’s threshold for policy changes is quite high,” Goolsbee said, adding that all policy options should be kept on the agenda.
Goolsbee said current tariffs will increase inflation and negatively impact economic growth in the short term. Describing the tariff system as a “major scenario,” Goolsbee said that although the Trump administration has suspended some measures, current levels are above most scenarios.
Despite the previous sell-off in the bond market, Goolsbee said the strong 10-year Treasury note auction eased market concerns, adding that these sales were not limited to the U.S. Noting the difficulty of measuring financial conditions, Goolsbee avoided speculation on how the Fed would respond to market stress.
Noting that employment data remains strong, Goolsbee said he prefers to rely on market inflation expectations rather than survey data.
Boston Fed President Susan Collins said the current interest rate policy is well positioned and that holding steady seems like the best option. Collins said there is still room for a rate cut in 2025, but that rising price pressures could delay that cut.
Collins said the tariffs would put upward pressure on inflation and slow economic growth, warning that this could push core inflation well above 3% this year. Collins also said it was critical to keep inflation expectations steady.
*This is not investment advice.
