Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee remarked on Friday that Fed officials are starting to align with the broader market's view that it's time for the US central bank to act on policy rates. However, he downplayed the possibility of a larger initial rate cut in September.
Key Highlights:
- The job market is showing signs of slowing down.
- Today's employment data continues the trend we've been observing.
- This raises significant concerns about the upcoming meeting and the months ahead, as we need to ensure the labor market doesn't deteriorate further.
- There is a strong consensus within the Fed for multiple rate cuts.
- On the topic of larger rate cuts: The dot plots didn’t predict inflation decreasing as quickly or unemployment rising significantly.
- Regarding a 50 bps cut in September: The outcome of the next meeting alone isn't the most critical factor.
- The current employment average is below the replacement rate.
- We have a bit more tolerance for an upside surprise in CPI, as the longer trend shows inflation is on a downward path.
- I'm concerned that if we maintain this level of restrictiveness, the likelihood of a recession may be increasing.
