Fed’s Goolsbee Says Last Week’s Rate Decision Was a ‘Close Call’

(Bloomberg) — The Federal Reserve’s decision to hold interest rates steady last week was a “close call” as central bank officials try to figure out whether they’ve tightened enough to bring inflation down, Chicago Fed President Austan Goolsbee said.

“For me, it still was a close call,” Goolsbee said Wednesday at a forum in Chicago.

“I felt like a reconnaissance mission is a perfectly appropriate thing to do after you’ve had 10 raises in a row, among the fastest increases in interest rates in recent memory,” Goolsbee said. “You know that it takes some time for that to work its way through the economy.”

The Fed last week paused a series of interest-rate hikes to assess the impact of monetary tightening on the economy after raising rates at each of its last 10 policy meetings. Officials also signaled they envisioned two more quarter-point rate hikes at some point this year in response to persistent inflation and job-market strength.

Goolsbee, who took office in January, has voiced more concern about tightening financial conditions than many of his colleagues following the collapse of four US lenders in recent months. The Fed has raised its benchmark rate by five percentage points since March 2022 in a bid to cool inflation, which last year reached a four-decade high.

The consumer price index last week showed price pressures continued to recede, though core inflation, which excludes food and energy, continued to rise at a pace that Fed officials find concerning. Employers also kept hiring at a rapid clip in May while job openings climbed in April, recent data showed.

Goolsbee’s comments at the Wall Street Journal Global Food Forum followed remarks from Fed Chair Jerome Powell, who told the House Financial Services Committee earlier on Wednesday that policymakers think it may make sense to keep raising rates in the coming months.

©2023 Bloomberg L.P.

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