Fed's Goolsbee in Fox Business interview welcomes latest inflation data, says more rate cuts may loom

By Michael S. Derby

Dec 18 (Reuters) - Federal Reserve Bank of Chicago President Austan Goolsbee said on Thursday “there’s a lot to like” in the latest consumer price index data, and if it can be sustained, it will help open the door for more interest rate cuts next year.

“My view is that the settling point of rates is a fair bit below where it is today, and that by the end of next year we can, as long as we are hitting our marks on getting inflation back on path to 2%, I think that it's realistic that rates can come down a fair amount,” Goolsbee said in a Fox Business interview. Goolsbee was one of two officials who voted against the central bank’s rate cut last week.

Goolsbee called data that showed some moderation in price pressures in November as measured by the CPI a “good month,” while cautioning not to make too much of a single month’s findings.

The report, its release delayed by the government shutdown, showed a moderation in price pressures. But economists viewed the report cautiously given issues with its compilation, and the favorable turn was not seen as an all-clear that price pressures, which have been well above the Fed’s 2% target, are abating on a sustainable basis.

The Fed cut its interest rate target by a quarter percentage point to between 3.5% and 3.75% on December 10, as it balanced rising risks to the job market with the fact that inflation remains too high. Goolsbee voted against the rate cut along with one other regional Fed leader, while one official voted in favor of a half percentage point easing.

In a statement last Friday, Goolsbee said “I believe we should have waited to get more data, especially about inflation, before lowering rates further.” He added, “waiting to take this matter up in the new year would not have entailed much additional risk and would have come with the added benefit of updated economic data which have been absent lately.”

In the interview on Thursday, Goolsbee said, “I just am uncomfortable front loading the rate cuts” before there’s strong confidence inflation will be returned to target. Before easing again, “we are going to want to see progress” on lowering price pressures.