Chicago Fed’s Goolsbee says he’s cautious about further rate cuts during shutdown
Chicago Federal Reserve President Austan Goolsbee expressed hesitancy on Thursday to cut interest rates further because the government shutdown has resulted in a disruption of key inflation data.
While Goolsbee has been an advocate of gradually lowering interest rates, the central bank official said during the CNBC interview that he had concerns about the lack of significant price reports, especially since overall inflation has been trending upward recently.
“If problems are developing on the inflation side, it will take quite some time for us to see that, and if they start to worsen on the labor market side, we will see that immediately,” Goolsbee said. “So that makes me even more nervous… front-loading interest rate cuts and trusting that the inflation we’ve seen in the last three months is temporary and assuming they’re going to go away.”
Goolsbee spoke as Chicago Fed was updated own control panel Labor market indicators. The data set pointed to a stable unemployment rate and a steady pace of hiring and firing in October. The Chicago Fed’s unemployment rate gauge stood at 4.36% for the month, up just one hundredth of a percentage point from September.
However, the Bureau of Labor Statistics will not release its October consumer price index report scheduled for next week.
The BLS released a report for September despite the shutdown because that number is used for Social Security cost-of-living adjustments. This report showed that inflation was running at 3% annually, compared to the Fed’s 2% target. Whether the Commerce Department can release the personal consumption expenditures price index, the Fed’s preferred gauge, depends on the resolution of the shutdown.
Goolsbee said the lack of inflation reports concerned him because three-month trends before the shutdown showed core inflation, which excludes food and energy prices, running 3.6% year-on-year.
“In the medium term, I am not a hawk on interest rates. I believe that the settling point of interest rates will be slightly below today’s level,” he said. “When it’s foggy, let’s be a little careful and slow down.”
Goolsbee will vote when the Federal Open Market Committee meets in December to decide whether to cut interest rates again, following cuts in the previous two meetings. But he will be a reserve player in 2026 before returning to voting duty in 2027.
