Chicago Fed President Austan Goolsbee said it was too soon to judge what officials should do with interest rates when they meet next month, though banking strain could do some of their work for them.
(Bloomberg) — Chicago Fed President Austan Goolsbee said it was too soon to judge what officials should do with interest rates when they meet next month, though banking strain could do some of their work for them.
“It has to give you some pause,” Goolsbee said of financial-sector turmoil in an interview on Fox News Friday. “That’s likely to slow the economy and for sure you should take that into account.”
“We know that credit conditions, like the ones we’re seeing now, in the past have been correlated with recessions, credit crunches — kind of done the tightening work of monetary policy,” he said. “We’ve got to be be data-dependent.”
The Fed raised rates by 25 basis points at its May 2-3 meeting this week, bringing interest rates to a range of 5% to 5.25%, and Chair Jerome Powell indicated that the central bank may be ready to pause its tightening campaign. Officials next meet June 13-14.
“It’s way too premature to know what to do with monetary policy especially because we’re up, we’re down on this credit thing,” he said.
Goolsbee has emerged as one of the Federal Open Market Committee’s most dovish members, saying before this month’s meeting that the central bank should exercise “prudence and patience” in raising interest rates, especially as it assesses the economic impact of tighter lending following several bank collapses. Despite that, he joined his colleagues in voting for the quarter-point rate increase this week.
A report earlier Friday showed an unexpected pickup in hiring last month, with nonfarm payrolls rising by 253,000, compared with economists’ estimates of a 185,000 boost. That, coupled with steady growth in wages, increased speculation the Fed may need to raise rates higher, though there will be several key data reports before the next FOMC meeting.
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