Chicago Fed's Goolsbee Says He's Cautious About Further Rate Cuts During Shutdown

Chicago Federal Reserve President Austan Goolsbee on Thursday expressed hesitation about lowering interest rates further because the government shutdown has resulted in a blackout on key inflation data.

While Goolsbee has otherwise been an advocate for gradually lowering rates, the central bank official said during a CNBC interview that he has concerns over the lack of important price reports, particularly with general inflation recently trending higher.

"If there are problems developing on the inflation side, it's going to be a fair amount bit of time before we see that, where if it starts to deteriorate on the job market side, we're going to see that pretty much right away," Goolsbee said. "So that makes me even more uneasy ... with front-loading rate cuts and counting on the inflation that we have seen in the last three months to just be transitory and assume that they're going to go away."

Goolsbee spoke as the Chicago Fed updated its own dashboard of labor market indicators. The data set indicated a stable unemployment rate in October and a steady pace of hirings and layoffs. The Chicago Fed's unemployment rate indicator was at 4.36% for the month, up just one one-hundredth of a percentage point from September.

However, the Bureau of Labor Statistics won't release its consumer price index report for October, which had been scheduled for next week.

The BLS did put out a report for September despite the shutdown, as that particular count is used for Social Security cost of living adjustments. That report showed inflation running at a 3% annual rate, compared to the Fed's goal of 2%. Whether the Commerce Department releases its personal consumption expenditures price index, the Fed's preferred gauge, depends on getting the lockdown resolved.

Goolsbee said the lack of inflation reports concerns him, as three-month trends prior to the shutdown showed core inflation, which excludes food and energy prices, running at a 3.6% annualized pace.

"Medium-run, I'm not hawkish on rates. I believe that the settling point for rates is going to be a fair bit below where it is today," he said. "When it's foggy, let's just be a little careful and slow down."

Goolsbee will get a vote when the Federal Open Market Committee meets in December to decide whether to cut rates again following reductions at the prior two meetings. However, he will rotate to being an alternate in 2026 before returning to a voting role in 2027.

Source: CNBC