The Chicago Fed president said the central bank would need to ‘play by ear’ whether any further rate increases are needed
Inflation staying stuck above the Fed’s 2 per cent target remains a greater risk than tight central bank policy slowing the economy more than needed to bring the pace of price increases under control, Chicago Fed president Austan Goolsbee said on Monday.
“The risk of inflation staying higher than where we want it is the bigger risk,” Goolsbee said in comments on CNBC. “We have got to get inflation back down to target...We ought to have 100 per cent commitment.”But he also said the debate over the current phase of Fed policy will “stop being how much more are they going to raise, and transform into well how long do we need to hold rates” at the peak level.
The Fed last week held its benchmark federal funds rate steady in a range of from 5.25 per cent to 5.5 per cent, with most policymakers anticipating one more quarter point rate increase would be needed this year. More notably, they cut in half the pace at which the policy rate is expected to fall next year as inflation slows, with officials projecting only half a point of rate cuts next year versus the full percentage point reduction anticipated as of June.
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