Chicago Federal Reserve Bank President Austan Goolsbee stated on Thursday that, given substantial evidence of a stable job market, the Fed should concentrate on reducing inflation, with his remarks keeping the possibility of interest rate cuts later this year alive.
The job market "remains strong," and "I think the most important thing we face is that we must get inflation back to 2%," Goolsbee said in an interview, adding that "interest rates could still be lowered quite a bit," potentially even this year, but "we must have convincing evidence that we are on a path to get inflation back to 2%."
Goolsbee's interview with the television channel coincided with the release of the latest U.S. jobless claims data, which indicated that workers do not appear to be losing their jobs on a large scale, despite concerns about hiring. Meanwhile, recent nonfarm payroll report data showed the unemployment rate receded in December, with many Fed officials describing the job market as a scene of low hiring and low firing.
The Fed reduced interest rates by three-quarters of a percentage point last year, a move based on policymakers' desire to help boost the job market while still maintaining sufficient restraint on the economy to lower price pressures that were significantly above the 2% target. Goolsbee, who had dissented against the December rate cut, said on Thursday he is no longer worried about the job market becoming too weak, which means the Fed must focus on returning inflation to its target level.
Speaking about the latest jobless claims data, Goolsbee said, "I am not surprised by these low numbers. As you know, I have been saying for months that the labor market indicators published by the Chicago Fed strongly suggest the labor market is stable."
Goolsbee also addressed the escalating tensions between the Fed and the White House, as Fed Chair Jerome Powell stated that the Justice Department's investigation into the Fed occurred solely because the Fed complies with the law, independently setting monetary policy rather than following orders from President Trump.
The President has repeatedly pressured the Fed to implement significant interest rate cuts.
Goolsbee expressed support for Powell's statement and issued a warning against interfering with the central bank's independence.
"Attempting to undermine the Fed's independence is like placing a stinky worm right in the middle of the path to 2% (the inflation target)," he stated.
"Any encroachment or attack on the central bank's independence is a mess, and if you try to strip the central bank of its independence, inflation will come roaring back."
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