Fed's Goolsbee Supports Gradual Rate Cuts, Eyes Neutral Rate and Overheating Signs

On Monday, November 25, Chicago Federal Reserve Bank President Austan Goolsbee stated that the Federal Reserve is expected to continue its rate-cutting actions. The goal is to adjust interest rates to a neutral level that neither stimulates nor restrains economic activity. He emphasized that unless there are convincing signs of economic overheating, there is justification for further reductions in the federal funds rate.

Goolsbee stated in his speech, "We are on a clear path of rate cuts and will eventually approach the neutral interest rate level." He further noted that although the pace of rate cuts might be adjusted due to changes in the economic outlook and environment, the general direction is clear. He expects that the neutral interest rate level is approximately close to the median forecast of 2.9% predicted by the Fed in September.

The Fed's decision dynamics are closely watched by the market. On Tuesday, the Fed will release the records of the Federal Open Market Committee (FOMC) meeting held from November 6-7. At this meeting, policymakers lowered the benchmark interest rate by 0.25 percentage points again, following a 0.5 percentage point rate cut in September.

Although the economy shows resilience and inflation data remains stable, some Fed officials are cautious about future rate cuts. Earlier this month, Fed Chairman Powell made it clear that the current economic conditions do not show signs of urgency for further rate cuts.

Goolsbee also urged calm. He noted, "Drawing conclusions from a single month's data is dangerous. It is important to observe long-term trends." He also mentioned that recent months' inflation data have generally been below expectations, yet they have not deviated far from the Fed's 2% growth target.

Before the upcoming policy meeting in December, the Fed faces a series of important economic data, including its favored core inflation indicator and the latest employment data. These data will provide key references for policymakers to decide the next direction of monetary policy.

Goolsbee's perspective offers some guidance to the market while suggesting the flexibility of future Fed policy. He emphasized that the Fed’s ultimate goal is to achieve economic stability and long-term sustainable growth, which requires careful assessment of the current economic situation and its risks.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.