Policymakers need to consider whether the current benchmark interest rate is appropriate for an economy that is showing signs of cooling outside of inflation, a Federal Reserve official said Monday.
Federal Reserve Bank of Chicago President Austan Goolsbee said in an interview that while the current restrictive monetary policy is in place to “guard against overheating,” leaving it in place could lead to risks the policy is slowing the economy down too much.
“If you’re going to be extra restrictive for too long, you’re going to have to start worrying about what’s happening to the real economy,” Goolsbee said. “If unemployment claims are going up, the unemployment rate is inching up, many of the other measures have cooled down to something like what they were before the pandemic, and you start to see weakness on consumer spending.”
Federal officials decided earlier this month to leave rates unchanged at between 5.25% and 5.5%. Since then, several reports have painted an incomplete picture on the overall health of the economy. While business activity has expanded, sticky inflation still plagues key sectors like housing. Additionally, unemployment claims have also run on the high side.
Last week, numerous Federal Reserve officials took a largely hawkish approach to the economic picture, opting for more conclusive data showing that inflation was tapering before considering rate cuts. This week looks to be a repeat – Goolsbee is among six Fed chiefs scheduled to speak.
Goolsbee described himself as “closet optimistic” that future data will show enough evidence of cooling inflation to open the door to a rate cut, which hopeful Wall Street investors have pegged for September.
Gold and silver were both trading higher Monday after a dismal end to last week. Gold was up $12.96 at $2,332 per ounce, as silver once again flirted with the $30 benchmark, up $0.25 at $29.63 per ounce.
