Chicago Fed President Austan Goolsbee recently shared his views on interest rate cuts, stating that a change in economic data is not necessary to justify such cuts. According to him, what is needed is simply more data. In an interview on Bloomberg Television, Goolsbee emphasized that if the data continues to be favorable, the path to normalization would be on track.
While Goolsbee did not provide a timeline for the first rate cut, he did express his reluctance to make predictions this early in light of the seven weeks of data that will be available before the next policy meeting. He also pointed out that there have been seven consecutive months of positive inflation reports, indicating a positive trend.
Tim Duy, the chief U.S. economist at SGH Macro Advisors, believes that Goolsbee’s views align with those of dovish members on the Federal Reserve who are in support of rate cuts. However, Duy also mentions that recent strong GDP figures for the fourth quarter and the January jobs report have provided ammunition for Fed hawks to counter the dovish argument, at least for now.
Duy further explains that it was already a bold move to anticipate rate cuts when the Fed projected economic growth in the range of 1.5% to 2% and monthly job additions of around 150,000. With GDP potentially reaching 3% to 4% and job growth surpassing 300,000, it becomes even more challenging to justify such preemptive rate cuts.
On Monday, stock prices experienced a decline (SPX DJIA), while the yield on the 10-year Treasury note (BX:TMUBMUSD10Y) rose to 4.17%.