This isn't a 2008-type of crisis; impact from rapid rate hikes still to come: Fed's Goolsbee
Federal Reserve Bank of Chicago President Austan Goolsbee said much of the impact from the Fed’s rapid rate-hiking campaign is still working its way through the economy, and noted that policymakers need to be careful as they assess their next move.
PremiumFederal Reserve Bank of Chicago President Austan Goolsbee said much of the impact from the Fed’s rapid rate-hiking campaign is still working its way through the economy, and said policymakers need to be careful as they assess their next move. “There’s still a lot of the impact of the 500 basis points we did in the last year that’s still to come," Goolsbee said in an interview with CNBC on May 15.
He noted that the current economic scenario ‘doesn't feel a 2008-type of crisis', adding that 'it feels like stress in some parts of the financial sector'
Goolsbee said it is still too soon to say what officials should do at their June 13-14 meeting, though he said his vote to support a rate hike last month was “a close call" given the turmoil in the banking sector. ‘’We should be extra mindful, want to get inflation back to target path without starting a recession,'' he said.
Also Read: What experts say about US Fed rate hike
Policymakers raised rates by a quarter percentage point at a meeting earlier this month, bringing their benchmark to a target range of 5 per cent to 5.25 per cent and signaling they may be ready to pause their tightening cycle.
Goolsbee said the Fed is now focused on the extent to which financial stress is filtering through to the rest of the economy. Meanwhile, inflation is improving but not rapidly, he said, and the labor market is still strong, suggesting policymakers may have more work to do to rein in price pressures.
Prices climbed 4.9 per cent from a year earlier in April, consumer price index data released last week showed, the first sub-five per cent reading in two years.
Earlier this month, the US central bank led by chair Jerome Powell last has raised the target range for the federal funds rate to 5 to 5-1/4 percent. However, FOMC said, it is prepared to adjust the stance of monetary policy as appropriate if risks emerge. For further rate hikes, chair Jerome Powell the Fed will take a data-depended approach to determine the rate decisions ahead as he believes the US banks are sound and resilient.
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