Chicago Federal Reserve President Austan Goolsbee said Friday he is confident inflation can be brought under control without a recession, even with further interest rate hikes.
Speaking to CNBC after the release of the June Nonfarm Payrolls report, he said continued job growth is part of the Fed’s “golden path” to restore price stability without taking over the economy.
“The Fed’s overriding goal right now is to bring inflation down. We’re going to be successful, and doing it without a recession would be a win,” Goolsbee told CNBC’s Steve Liesman during an interview on “Squawk on the Street.” “That’s the golden path, and I feel like we’re on that golden path. So I hope we keep putting recession off forever. We’ll never have a recession again.”
Economists, including those at the Federal Reserve, see the credit crunch leading to at least a modest recession by the end of this year or in early 2024.
However, one of the key cogs in the economy, the labor market, is showing only slight signs of slowing down. Payrolls rose just 209,000 in June, below Wall Street estimates, but a 3.6% unemployment rate suggests a resilient economy.
“Overall, the labor market is exceptional and is returning to a sustainable and balanced level,” Goolsbee said.
Yet inflation has remained stubbornly high and well above the Fed’s 2% target.
After the June meeting, a large majority of Federal Open Market Committee officials indicated in their updated quarterly projections that they see at least two more quarter-point rate hikes before the end of 2023. Although Goolsbee said that he is confident that inflation is abating, he also sees further tightening as likely.
“The consensus of almost all of the FOMC in the projections statement is that during this year we will have one or two more hikes. I have not seen anything that says that is wrong,” he said. “That’s on the golden path where we bring inflation down to something like our target and we do it without a recession.”
Fed policy is seen as operating on a lag, which means that the 10 rate hikes since March 2022 likely have yet to work their way into the economy. Goolsbee said he is undecided on whether to raise at the July 25-26 FOMC meeting.
“There are some modest increases to come, but we’ve lifted a lot and are now waiting for the impact,” he said.