Fed Latest: Goolsbee Shrugs Off Inflation Pickup In Early 2024

Patrick Harker

(Bloomberg) -- Federal Reserve Bank of Chicago President Austan Goolsbee said that higher-than-expected inflation readings from the start of the year likely don't change the broader picture of cooling price growth.

Goolsbee is among more than a half-dozen Fed officials set to speak Thursday in moderated discussions or speeches. Others include Cleveland Fed President Loretta Mester and Minneapolis's Neel Kashkari.

The wave of commentary from officials follows remarks by Chair Jerome Powell just a day earlier. Powell emphasized the Fed has time to assess incoming data before reducing rates, signaling policymakers are willing to wait for clearer signs of lower inflation to act.

It's not yet clear whether the pickup in key price gauges at the start of 2024 is a temporary blip on the path to the central bank's 2% inflation goal or a sign that progress has stalled.

In projections released after the Fed's March meeting, officials penciled in three rate cuts this year — but just narrowly. Nine of 19 officials anticipate two or fewer reductions.

(All times are NY)

Goolsbee Sees Inflation Still on Track To 2% Goal (1:10 p.m.)

The Chicago Fed chief, speaking at an event in Oak Brook, Illinois, shrugged off the apparent slowdown in inflation progress in January and February.

“My overall assessment is that these two months should not knock us off the path back to target,” Goolsbee said in prepared remarks, adding that economic activity right now does not resemble a traditional overheating of demand.

Goolsbee pointed to the role of cooling goods prices in lowering inflation, as supply chains improved during the pandemic recovery. Increasing labor supply will likely further ease services prices, he said, adding that housing inflation is now the most valuable indicator of the immediate future.

“Based on market data on rents for new leases, I have been expecting it to come down more quickly than it has,” Goolsbee said. “If it does not come down, we will have a very difficult time getting overall inflation back to the 2% target.”

Barkin Says Fed Has Time to Gain Clarity Before Cutting (12:10 p.m.)

Richmond Fed President Thomas Barkin said it's “smart” for the central bank to take time to gain greater clarity about the inflation trajectory before lowering interest rates.

“No one wants inflation to reemerge,” Barkin said in prepared remarks to the Home Building Association of Richmond. “Given a strong labor market, we have time for the clouds to clear before beginning the process of toggling rates down.”

The Richmond Fed chief said he is confident that “all this tightening” will slow the economy further, adding that he wants to see cooling prices broaden to a greater share of goods and services.

“I am optimistic that keeping rates somewhat restrictive can bring inflation back to our target,” he said.

Harker Says Inflation Still Too High (10:00 a.m.)

Philadelphia Fed President Patrick Harker said inflation remains too high, even as the economy has been resilient and job growth remains strong.

“We're not where we need to be,” the Philadelphia Fed chief said during a moderated discussion at the University of Pennsylvania's Wharton business school. “Inflation is still too high, particularly for the ALICE communities — the asset-limited communities, and income constrained.”

Dudley Says Fed's Long-Term Rate Outlook Too Low (8:30 a.m.)

Interest rates probably won't fall as far as Fed officials currently expect over the next several years, former New York Fed President and Bloomberg Opinion columnist Bill Dudley said on Bloomberg Television.

The three rate cuts policymakers have penciled in for 2024 isn't out of the realm of possibility, Dudley said. But higher inflation on average and a higher neutral interest rate — one that neither slows nor stimulates growth — means the federal funds rate will likely be above the 2.6% long-term rate Fed officials estimated in March, according to their median forecast. Markets, meanwhile, see rates settling nearly a percentage point higher than the Fed over the long run, he added.

“I think the market is right that the Fed is not going to go as far as the Fed is projecting,” Dudley said.

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