Chicago Federal Reserve President Austan Goolsbee said policymakers should cut interest rates if U.S. inflation continues to fall back to the 2% target, reported Bloomberg News on Tuesday.
According to the report, Goolsbee, while speaking on Bloomberg TV in Sintra, Portugal, said he feels “we are on a path to 2%” inflation and “if you just hold the rates where they are while inflation comes down, you are tightening — so you should do that by decision, not by default.”
Last month, the government’s Consumer Price Index report was flat in May, cooler than the +0.1% expected and stalling from the 0.3% increase in the prior month.
The U.S. Federal Reserve, in June, kept its benchmark policy rate unchanged for a seventh straight meeting, even though policymakers acknowledged that there had been “modest further progress” towards their 2% inflation target.
“We got to this rate when inflation was over 4%, and inflation is now down close to 2.5%, so if you sit with the rate somewhere while inflation goes down you’re tightening. The reason that you would want to tighten is if you think that you’re not on a path to 2%,” Goolsbee said, adding that inflation appeared to be returning to target.
Goolsbee is not a voting member this year on the Federal Open Market Committee.