By Michael S. Derby
Jan 15 (Reuters) – Chicago Federal Reserve President Austan Goolsbee said on Thursday the U.S. central bank should be focused on getting inflation down amid ample evidence of job market stability, in comments that kept alive the prospect of interest rate cuts later this year.
“There’s still strength” in the job market and “I think the most important thing facing us is we’ve got to get inflation back to 2%,” Goolsbee said in an interview on CNBC. “Rates can go down still a fair amount,” with cuts even happening this year, but “we have to have convincing evidence that we’re on path back to 2% inflation.”
Goolsbee spoke to the television channel as the latest round of U.S. unemployment insurance claims data landed, which showed that despite worries about hiring, workers do not appear to be losing jobs en masse. Meanwhile, recent payrolls data showed a retreat in the unemployment rate for December, as many Fed officials have described the job market as being in a low-hire, low-fire landscape.
The Fed lowered rates by three-quarters of a percentage point last year, moves that were based on central bankers’ desire to help buoy the job market while still providing enough restraint to the economy to lower price pressures that are well above the 2% target. Goolsbee, who dissented against the December rate cut, said on Thursday he is no longer worried that the job market is getting too soft, which means the Fed must focus on getting inflation back to target.
Pointing to the latest claims data, Goolsbee said “I’m not surprised by these low numbers. I’ve been saying, as you know, for months, that our labor market indicators coming out of the Chicago Fed suggest strongly that there’s stability in the labor market.”
GOOLSBEE WARNS ABOUT INFRINGING ON FED’S INDEPENDENCE
The Chicago Fed president also addressed the escalating tensions between the U.S. central bank and the White House amid Fed Chair Jerome Powell’s statement that a Justice Department investigation into the central bank is happening simply because the Fed followed the law and set monetary policy independently, rather than taking orders from President Donald Trump.
The president has repeatedly pressured the Fed to deliver large rate cuts.
Goolsbee offered support for Powell’s statement and warned about interfering with the central bank’s independence.
“To try to blow up Fed independence is kind of a festering stink bug in the middle of that road back to 2%,” he said.
“I know that there have been countries that had criminal investigations of their central banks, but those countries are Zimbabwe and Russia and Turkey and a bunch of places that you would not characterize as advanced economies,” Goolsbee said.
“Anything that’s infringing or attacking the independence of the central bank is a mess, you’re going to get inflation come roaring back if you try to take away the independence of the central bank.”
(Reporting by Michael S. Derby; Editing by Paul Simao)
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