By Ann Saphir
(Reuters) -Chicago Federal Reserve President Austan Goolsbee said on Friday he believes inflation is “on track” to reaching the U.S. central bank’s 2% target, driven in coming months by what he expects to be a decline in housing inflation.
“It’s working through in the way we’ve anticipated,” Goolsbee said at an economic symposium at the regional Fed bank, adding that there is “no evidence” that inflation has stalled at 3%, as some analysts have worried. “I still think it’s on track to get to 2%,” he said.
Progress has been helped, he said, by public faith in the Fed’s determination to beat inflation, which soared to 40-year highs last year.
It has also been helped by improvements in the supply of both labor and goods, which was disrupted during the coronavirus pandemic and its aftermath, he said.
By the Fed’s preferred measure, the personal consumption expenditures price index, inflation registered 3% in October.
Meanwhile the labor market is “very strong” even as it gets into better balance, setting up the U.S. economy for a “soft landing” where inflation falls but unemployment does not surge, he said. Unemployment in October was 3.9%.
Fed Chair Jerome Powell said in separate remarks on Friday that the risks of the Fed moving too far with interest rate hikes, and slowing the economy more than necessary, have become “more balanced” with those of not moving high enough to control inflation.
Powell’s and Goolsbee’s remarks were among the last from Fed policymakers before their Dec. 12-13 policy meeting, at which the central bank is expected to leave its benchmark overnight interest rate unchanged in the 5.25%-5.50% range for the third straight time.
Chief among potential risks to the U.S. economy in the coming year is the possibility of a “meltdown” in China, Goolsbee said.
And if inflation progress stalls, or housing inflation does not improve as he forecasts, or if goods prices resurge, “we’re going to do what it takes to get inflation back to target,” he said.
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