Federal Reserve Bank of Chicago President Austan Goolsbee said it’s possible for the U.S. to avoid a recession even as the central bank raises interest rates to cool inflation.
“I’ve been calling that the golden path and I think it’s possible, but there are a lot of risks and the path is long and winding,” Goolsbee said Monday in an interview with CNBC.
He pointed to the unemployment rate, which at 3.8% last month was still very close to where it was last year when inflation was more than double what it is now and the Fed was just embarking on its aggressive tightening campaign.
Fed officials voted to hold their benchmark lending rate steady last week at a 22-year high, and most said they expect to lift it one more time this year. In projections released after the two-day meeting, policymakers also signaled they’re more optimistic about the prospects for a “soft landing” for the US economy, but made clear they see rates staying higher for longer than previously expected.
Chair Jerome Powell said policymakers will “proceed carefully” as they near the end of their rate-hiking cycle, but emphasized that the Fed remains committed to bringing inflation back to its 2% target.
In July, Fed officials’ preferred inflation gauge rose 0.2% for the second consecutive month, the smallest back-to-back gains since late 2020. Policymakers will get fresh inflation data for August on Friday.
Goolsbee earlier this month said he and his colleagues are beginning to see progress in monthly prints of core inflation. He reiterated that the Fed is rapidly approaching the time when the discussion will shift to how long to hold rates high for, rather then how high it should go.