Fed is in a moment of transition: Chicago Fed's Goolsbee

The blockbuster September jobs report has traders pulling back expectations for a 50 basis point cut from the Federal Reserve at its November meeting.

In an interview with Yahoo Finance after the report's release, Federal Reserve Bank of Chicago President Austan Goolsbee didn't commit to any specific rate-cut path given how much data will be released between now and the next meeting as well as his desire to confer with his Fed colleagues. However, Goolsbee emphasizes that the Fed's goal "is to keep the conditions of the dual mandate, the inflation and the unemployment, almost exactly where they are right now."

Speaking with Yahoo Finance Federal Reserve Reporter Jennifer Schonberger, Goolsbee stresses that this is a period of transition for the Fed. "The hardest thing that a central bank has to do is get the timing exactly right when there are moments of transition. We're in or around a moment of transition right now. We are transitioning from an almost exclusive focus on cutting the inflation rate to a more balanced approach, where we're thinking about the trade-offs and keeping inflation around the target, keeping unemployment around this full employment, sustainable level," he says.

As to what the Fed's neutral rate may be, Goolsbee points to the "dot plot" from the FOMC's Summary of Economic Projections as a guide. However, he cautions that things like worker strikes and geopolitical unrest are "external shocks" that may force the Fed members to pivot, given that those sorts of events have "derailed many a soft landing in previous times."

Be sure to check out the full interview with Chicago Fed President Austan Goolsbee.

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This post was written by Stephanie Mikulich.

Video Transcript

So then, looking at the median projection based on the CP, which guides for two more 25 basis point rate cuts for the remainder of this year, does that still seem reasonable to you?

Uh, you you know, I don't like tying our hands or committing to specific rate changes at the next meeting or the or the meeting after that, because we're gonna get a bunch more data before those meetings and because I'm gonna go sit down and hear what, uh, what my colleagues have to say.

I think our goal is to keep the conditions of the dual mandate the inflation and the unemployment almost exactly where they are right now.

And the hardest thing that a central bank has to do is get the timing exactly right.

When there are moments of transition, we've we're in or around a moment of transition.

Right now, we are transitioning from a almost exclusive focus on cutting the inflation rate to a more balanced approach where we're thinking about the tradeoffs and keeping inflation around the target, keeping unemployment around this full employment sustainable level.

And we we're gonna have discussions and arguments over what's the rate that we ultimately need to settle on, but I think over a 12 to 18 month period is with without substantial changes to the conditions.

I still see that that analysis that is held by a lot of the committee that feels right to me.

Where do you see neutral right now?

A.

And how quickly do you think that you need to get there?

Both of those are are challenging and and important questions.

Of course.

I think that if you just go look at the dot plot of where do people think that rates will ultimately settle down?

If you call that neutral, the bulk of the committee is, Let's call it in a 2.5 to 3.5 kind of a range, um, and has outlined, uh, that the appropriate rate to get there is over 12 to 18 months.

It completely depends on how conditions evolve, though.

Is is, is what I would like to add you.

We can't.

We can't determine the pace at which or even the direction at which we want to get, uh, to neutral in the short run unless we know our oil price is gonna go up because of war in the Middle East is looks now like there's not going to be a strike among the longshoremen and the dock workers.

But external shocks like that have derailed many a soft landing, uh, in in in previous times, and we've got to be attuned to all of those conditions before we can answer that.