Chicago Federal Reserve President Austan Goolsbee said Friday he’s confident inflation can be tamed without a recession, even with additional interest rate increases likely.
Speaking to CNBC following the release of the June nonfarm payrolls report, he said the ongoing job growth is part of the Fed’s “golden path” toward restoring price stability without taking the economy.
“What the Fed’s overriding goal right now is to get inflation down. We’re going to succeed at it and to do that without a recession would be a triumph,” Goolsbee told CNBC’s Steve Liesman during a “Squawk on the Street” interview. “That’s the golden path, and I feel like we’re on that golden path. So I hope we keep putting off the recession to forever. Let’s never have a recession again.”
Economists, including those working at the Fed, see credit contraction leading to at least a modest recession later this year or early in 2024.
However, one of the economy’s key cogs, the jobs market, is showing only slight signs of slowing down. Payrolls grew by just 209,000 in June, below Wall Street estimates, but an unemployment rate at 3.6% suggests a resilient economy.
“Overall, the jobs market is outstanding and is getting back to a balanced, sustainable level,” Goolsbee said.
Inflation, though, has remained stubbornly high and well above the Fed’s 2% goal.
Following the June meeting, a strong majority of Federal Open Market Committee officials indicated in their updated quarterly projections that they see at least two more quarter percentage point rate hikes before the end of 2023. Though Goolsbee said he is confident the that inflation is ebbing, he also sees more tightening as likely.
“The consensus of almost all the FOMC in the statement of projections is that over this year, we will have one or two more hikes. I haven’t seen anything that says that’s wrong,” he said. “That is on the golden path where we get inflation down to something like our target and we do it without a recession.”
Fed policy is seen as operating with a lag, meaning that the 10 rate hikes since March 2022 likely haven’t worked their way through the economy yet. Goolsbee said he is undecided about whether to hike at the July 25-26 FOMC meeting.
“There are some modest increases to come, but we’ve done a lot of the lifting and now we’re waiting for the impact,” he said.