Austan Goolsbee, the president of the Chicago Federal Reserve, stated on Tuesday that a soft landing is still an option as the central bank works to fight inflation without suffering severe consequences for the economy.
Goolsbee stated on CNBC’s “Squawk Box” that “there is the possibility of the golden path… that we got inflation down without a recession” because of some of the peculiarities of the present. “That’s our goal. If that happened, it would just be a continuation of what we’ve already seen this year, which is a very slight increase in unemployment while a significant decrease in inflation.”
After a run of eleven rate hikes, the Federal Reserve decided to hold its second consecutive meeting last week and kept interest rates unchanged.
According to the personal consumption expenditures price index, core inflation is currently running at 3.7% annually, which is still significantly higher than the Federal Reserve’s 2% annual target. Goolsbee highlighted that the current decrease in price pressures represents a significant accomplishment in and of itself.
Goolsbee stated, “The year 1982 saw the fastest drop in the inflation rate in any year.” “We’ll watch over the coming months to see what transpires. We could match the century’s fastest rate of inflation decline. Therefore, the inflation rate is improving.
Over the past 18 months, despite the tightening measures, the economy has fared well. In the third quarter, the GDP grew at an annualized rate of 4.9%, exceeding even high projections.
Goolsbee emphasized that it won’t be simple to follow a “golden path” in the face of a historically high rate of inflation.
“There has never been an inflation rate decline to bring inflation down to the extent that we are bringing it down without a major recession, which is unusual for a soft landing of this size. That has essentially never occurred,” he remarked. “Let’s attempt to handle that.”
Echoing Chair Jerome Powell’s remarks from last week, the Fed president stated that moving forward, the central bank will rely more on data.
Powell had earlier stated that no decisions have been made by the central bank for its meeting in December and that “the committee will always do what it thinks is appropriate at the time.”
