Fed should not rely too much on market reaction to guide policy, Goolsbee says

(Reuters) - The Federal Reserve must supplement traditional government data and readings from financial markets with real-time, on-the-ground observations of economic conditions if it is to make good policy, Chicago Fed President Austan Goolsbee said on Tuesday.

"This is especially true when things are as strange and up in the air as they have been through much of the pandemic times," Goolsbee said in the text of his first public remarks since taking over as head of the Fed regional bank on Dec. 1 from Charles Evans.

"It is a danger and a mistake for policymakers to rely too heavily on market reactions" like stock and bond market gyrations that "tell us which way the markets want the Fed to move," he said.

Financial markets increasingly are pricing in expectations that the U.S. central bank will raise its benchmark overnight interest rate in coming months to a 5.25%-5.50% range, from the current 4.50%-4.75% range, as it seeks to curb stubbornly high inflation. That's slightly higher than where Fed policymakers in December signaled they would need to take the policy rate.

Fed policymakers will provide updated projections on the rate path and economy at the end of their March 21-22 meeting.

Goolsbee was speaking to the Ivy Tech Community College in Goshen, Indiana. Earlier on Tuesday, he visited the operations of Indiana-based RV manufacturer Jayco.

Fed Chair Jerome Powell earlier this month said one of the U.S. central bank's most important resources is the "haul" of information on local economies and communities gleaned from regional Fed banks like the one that Goolsbee now heads.

(Reporting by Ann Saphir; Editing by Paul Simao)