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Chicago Fed President Austan Goolsbee expressed optimism that interest rates will be lowered significantly next year.
Speaking at a keynote hosted by Crain's Chicago Business Editor-in-Chief Ann Dwyer, Goolsbee addressed the challenges and opportunities facing the U.S. economy and monetary policy.
“We have very few tools. I told you we can only tighten or loosen,” Goolsbee explained. While monetary tightening helps combat inflation, he noted that raising interest rates too high risks unintended economic consequences. “The only way to create deflation for the economy as a whole is to crash it,” he said, drawing historical comparisons such as the Great Depression.
Goolsbee noted significant economic successes as he assessed progress in 2024. Inflation has been steadily declining, approaching the Fed’s 2% target. At the same time, the labor market remains flexible and sustainable full employment levels are becoming a reality. “We have reached sustainable full employment without overheating. I expect we can get there,” he said.
As the Fed nears the end of 2024, Goolsbee expects a “reasonable amount” of rate cuts from current levels over the next year if economic conditions remain stable. However, he acknowledged the need for flexibility, noting that decisions are reviewed every six weeks based on evolving data.
*This is not investment advice.