Fed is taking ‘wait and see’ approach, Goolsbee says

By Ann Saphir

(Reuters) – Chicago Federal Reserve Bank President Austan Goolsbee said on Wednesday that the U.S. central bank needs more clarity on inflation and the labor market’s trajectory before deciding on its next step.

“I feel like the Fed’s framework is, ‘wait and see,'” Goolsbee told the WSJ Global Food Forum in Chicago. “If you don’t see progress, that is an answer, if you do see progress, that is also an answer.”

Goolsbee joined other Fed policymakers last week in a unanimous vote to leave interest rates at their current 5.00%-5.25% range, a decision which he said felt like a close call to him personally.

“We’re in this weird foggy environment where it’s hard to figure out where the road is, and I felt like a reconnaissance mission is a perfectly appropriate thing to do” after 10 straight interest-rate increases, Goolsbee said. “You know that it takes some time for that to work its way through the economy, and just trying to figure out whether we’ve done enough, how much more needs to be done.”

Over the next couple of months, he said, the Fed should get a better read from the data that will shape its next decision, one that he said he has not yet made up his mind on.

The biggest puzzle, he said, is not why services inflation is persistent – that was expected, he said – or even about when housing inflation will decline – likely by the fall, he said – but rather why goods inflation has not more quickly returned to its zero or negative pre-pandemic readings.

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