Fed's Goolsbee: Premature to Cut Rates Based on Expected Productivity Gains; Rate Cuts Only When Inflation Declines

Odaily News Fed's Goolsbee stated that it is still too early to bet that productivity gains will lower inflation, and rate cuts are only appropriate when inflation declines. Goolsbee indicated that he expects rate cuts may occur this year, but only if inflation returns to the Fed's target level. The downward trend in inflation has stalled, with core services inflation excluding housing remaining stubbornly high. For him, it is not clear whether current interest rates are restrictive, so the Fed needs to remain vigilant. Cutting rates prematurely based on expectations of productivity gains could lead to economic overheating. Regarding the labor market, Goolsbee believes the current situation of low hiring and low layoffs is driven by uncertainty, which may persist after the Supreme Court's ruling on tariffs. However, he does not consider the current economic growth and labor market to be fragile. Regarding the Fed's balance sheet, similar to comments from Fed Governor Waller, Goolsbee stated that any discussion about returning to a scarce reserve system requires further exploration of its pros and cons. (Jin10)