By Michael S. Derby
NEW YORK (Reuters) – Chicago Federal Reserve President Austan Goolsbee reiterated on Monday that he sees a case for extensive U.S. central bank interest rate cuts given the current state of the economy and where it is likely to go.
When it comes to monetary policy, “this is a process over a year or more that we’re trying to get the rates down to normal,” Goolsbee said in an interview with Fox Business. As for the pace and ultimate scope of rate cuts, the Fed’s benchmark overnight interest rate has “got to come down a lot more than 25 basis points over the next 12 months. It’s going to be a lot of cuts,” and the most recent set of central bank forecasts show policymakers are on board with that outlook, Goolsbee said.
The Fed has embarked on what it projects to be a steady stream of rate cuts driven by ebbing inflation pressures and rising risks to the job market. Goolsbee noted that the economy has largely normalized, which allowed the Fed earlier this month to lower its policy rate by half of a percentage point to the 4.75%-5.00% range.
Goolsbee flagged what he saw as cautionary factors for the job market, while adding that the current unemployment rate appears – at 4.2% – to be around a sustainable pace.
With a U.S. port workers strike imminent, Goolsbee said he’s worried about what an extended shutdown could do to the economy.