Last Updated: 09/23/24

National Association of State Treasurers Annual Conference

Chicago Fed President and CEO Austan Goolsbee engaged in a keynote conversation on monetary policy and the U.S. economy on Sept. 23, 2024, at the annual NAST meeting at Swissotel Chicago.

Below are planned talking points Goolsbee prepared for the event and shared with reporters in advance.

The views expressed below are those of President Goolsbee and are not necessarily those of the Federal Reserve System or the Federal Open Market Committee (FOMC).

At a moment like this, it’s important for the Fed to think beyond the short run and identify the through lines of the economy. That longer arc said it was time to act and suggests there will be more to come.

Inflation is way down from its peak. Indeed, for multiple months, it has actually been coming in at the 2% target—and expectations data suggest the market doesn’t think it’s going back. The unemployment rate at 4.2% is at the level many consider sustainable full employment. Basically, we would love to freeze both sides of the Fed’s dual mandate right here.

Yet rates are the highest they’ve been in decades. It makes sense to hold rates like this when you want to cool the economy, not when you want things to stay where they are.

We set the rate high and held it there for more than a year because inflation was extreme, and we promised to get it back to 2%. Fighting inflation was the obvious priority.

But as we’ve gained confidence that we are on the path back to 2%, it’s appropriate to increase our focus on the other side of the Fed’s mandate—to think about risks to employment, too, not just inflation. And given the through line on economic conditions, that likely means many more rate cuts over the next year.

If we want a soft landing, we can't be behind the curve. Of course, getting the timing right at moments of transition is maybe the hardest challenge a central bank faces. It’s especially hard at a moment like this where conditions are so different from previous cycles. But knowing that labor markets tend to deteriorate quickly when they turn and that monetary policy takes time to act, it’s just not realistic to wait until problems show up.

I am comfortable with a starting move like this—the 50 basis point cut in the federal funds rate announced last Wednesday—as a demarcation that we are back to thinking more about both sides of the mandate. To me, the specific timing of the initial cut is less important than the longer-arc view that conditions are good on both sides of the mandate. Rates need to come down significantly going forward if we want the conditions to stay that way.

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