In an interview with the Financial Times on Wednesday, Chicago Federal Reserve President Austan Goolsbee suggested that borrowing costs could be “a fair bit lower” in the next 12 to 18 months. His comments provide insight into the Fed‘s future monetary policy direction, as economic uncertainty continues to shape its decisions.
Key Remarks:
Goolsbee acknowledged that the U.S. economy has entered a new phase, moving away from the path seen in the previous two years.
He expressed concerns over market anxiety surrounding inflation, noting that such sentiments could serve as a “red flag” for the Fed.
Goolsbee emphasized that if investor expectations align with those of American households, the central bank may need to take action.
While forecasting lower borrowing costs in the future, he cautioned that the next interest rate cut might take longer than expected due to ongoing economic uncertainty.
He called for a “wait and see” approach in the face of this uncertainty, suggesting that the Fed needs to monitor developments closely before making any moves.
Market Reaction: Following Goolsbee’s remarks, the US Dollar Index (DXY) rose 0.13% to 104.35, flirting with intraday highs, as markets digested the implications of the Fed’s potential future actions.
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