In crucial remarks that cast a shadow over global market expectations, Austin Goolsbee, president of the Federal Reserve Bank of Chicago, called for caution and urged against rushing into a decision to cut US interest rates.
Goolsbee stressed that current economic data indicates that the pace of inflation, although it has declined from its peak, is "not good enough" to justify a shift towards monetary easing at the present time, emphasizing that any hasty step could have adverse consequences.
The economic context and concerns about persistent inflation
During his speech at the annual conference of the National Association for Business Economics in Washington, Goolsbee explained that cutting interest rates would not be an appropriate decision until there was strong and tangible evidence that inflation was steadily declining to reach the central bank's target of 2%.
This caution comes in the context of recent history, where the US economy has suffered from severe inflationary waves that prompted the Federal Reserve to adopt a strict monetary tightening policy. Goolsbee pointed to an important lesson from the recent past, warning against repeating the mistake of "temporary inflation deception," where policymakers previously believed that rising prices were fleeting, leading to a delayed response.
Housing sector challenges and their impact on decision-making
In detailing the influencing factors, the president of the Chicago Federal Reserve drew attention to the dilemma of "housing inflation," noting that rising prices in this sector are not directly linked to tariffs or external factors, but rather are an internal indicator that warrants vigilance. He added, "People see prices as one of the most pressing issues in their daily lives," making the Fed's task of bringing inflation back to 2% non-negotiable before it begins to stimulate the economy.
Market forecasts and global impact
These statements are reshaping investor expectations. According to futures market estimates, the Federal Reserve is now more likely to keep interest rates unchanged until at least June, with the probability of a rate cut beginning in July increasing. Markets had previously priced in expectations of the Fed cutting rates approximately three times in the second half of 2025, but these estimates are subject to ongoing revision based on data.
The Fed's decision is of paramount importance to the global economy, as keeping interest rates high for a longer period means continued high borrowing costs for businesses and individuals, which could slow economic growth. However, it is the necessary bitter pill to curb inflation and ensure long-term price stability.
