Federal Reserve Bank of Chicago's President, Austan Goolsbee, expressed optimism on Monday that the U.S. can avoid a recession despite the central bank's ongoing efforts to raise interest rates to curb inflation. Goolsbee acknowledged numerous risks and a complex journey ahead, referring to this scenario as the 'golden path'.
Last week, Federal Reserve officials decided to maintain their benchmark lending rate at its highest point in 22 years. The majority anticipate a further increase before the year ends. Following their two-day meeting, they released projections indicating growing optimism for a 'soft landing' for the U.S. economy. However, they also suggested that they foresee interest rates remaining elevated for a longer period than initially anticipated.
Federal Reserve Chair Jerome Powell assured that policymakers will act cautiously as they approach the end of their rate-hiking cycle. He emphasized the Fed's commitment to return inflation to its target of 2%.
Goolsbee drew attention to the country's unemployment rate, which stood at 3.8% last month. This figure is not far off from its position last year when inflation was more than twice its current rate and the Federal Reserve had just initiated its aggressive campaign to tighten monetary policy.
Earlier this month, Goolsbee stated that he and his colleagues are starting to observe progress in the monthly core inflation data. He reiterated that discussions within the Fed are soon going to shift from deciding how high-interest rates should rise, to determining how long these heightened rates should be sustained.
In July, the preferred inflation measure by Fed officials rose by 0.2% for two consecutive months. This represents the smallest sequential gains since late 2020. Policymakers are set to receive updated inflation figures for August later this week.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.