Headline

  • Fed’s Goolsbee: A substantial drop in inflation is the trend.
  • Fed’s Goolsbee: The Fed targets PCE, which continues to show good progress on getting inflation down.
  • Fed’s Goolsbee: PPI data is the most noisy, and least predictive; don’t take too much heart from it - Fox News Interview.
  • Fed’s Goolsbee: 2023 a “hall-of-fame” year for reducing inflation.
  • Fed’s Goolsbee: Risks include persistent housing inflation, & potential supply shocks.
  • Fed’s Goolsbee: My Federal funds rate view not the lowest dot of the Fed policymaker projections, is nearer the median.
  • Fed’s Goolsbee: Inflation will be the primary determinant of when and how much interest rates should be cut.
  • Fed’s Goolsbee: The Fed so far is still on the golden path though it could be derailed.
  • Fed’s Goolsbee: The Fed will need to evaluate policy restrictiveness as inflation comes down.
  • Fed’s Goolsbee: Unlike a year ago, risks to the golden path are more symmetric, not all about dangers of overheating.
  • Fed’s Goolsbee: The Federal Reserve are still definitely on a comfortable path and making progress on inflation.
  • Fed’s Goolsbee: 2023 was a hall-of-fame year for inflation reduction.
  • Fed’s Goolsbee: Overall CPI inflation in December was pretty close to what was expected.
  • Fed’s Goolsbee: December services inflation was a little more favorable than expected; housing inflation was a little less favorable.
  • Fed’s Goolsbee: Persistently high shelter inflation in CPI may have less implication for the Fed’s personal consumption expenditures inflation target.
  • Fed’s Goolsbee: Risks include persistent housing inflation & potential supply shocks.

    Reuters Article

    Transcript

    Fox: Oh, and if you think about not talking live data before the price growth. What did you make today?

Goolsbee: Well, it’s bad news and there’s good news. Yeah. This highlights there a lot of different measures of inflation. The bad news is the Producer Price Index is probably the most noisy, least predictive of the inflation measure. So I don’t think you should take too much hard from the fact that that you showed that inflation improvement. The good news is, if you take a step back over the course of the last year, we’ve had a very substantial drop in inflation. So I don’t think we want to get too hung up on any one month’s report, right. The measure that the Fed looks at which is the PCE deflator, not the CPI, the new months of inflation, continued to show good progress in getting inflation down. And that’s the thing that got wildly out of control. I mean, we had inflation, they got up as high as 9%. Right. And now we’re down into the threes and the new months are in the twos and that’s the right direction.

Fox: All right, and you were referring to a personal consumption and it’s known to be a favorite of you and your fellow brainiacs at the Fed but get lost in the one thing I wonder is Americans just aren’t buying it and it’s you know, the trend is definitely a friend that the numbers don’t belie that but but when when when there’s a disconnect and for you guys when you gather for your your meetings and decide the course of interest rates.re you puzzled by that and that Americans aren’t feeling it. Many are still buying a lot of stuff. The jobs are still strong and all of that. But there’s a significant delay going on here the likes of which I haven’t seen when we usually had a good spate of numbers, that they’re not buying it does that work into the Fed?

Goolsbee: It doesn’t work into the Feds thinking seeing how the market reacts to a bid on all of those. I think you’re right. I haven’t seen a divergence between kind of the numbers and the people sentiments about the economy. This big and really, maybe forever but in a long time. That said, as you know, the Federal Reserve Act gives the Fed a job, which is a dual mandate that we have to look at the actual numbers, we got to maximize employment and stabilize prices. So we care about consumer sentiment and business sentiment to the extent that they are predictive of actual behavior. And the one thing that I’ll observe is that people’s feelings and consumer sentiment especially which used to be a pretty good indicator of consumer spending, that relationship has broken down. So we watch the feelings. There is a Beige Book, where we monitor business and consumer sentiment that feeds into the FOMC decisions on interest rates. Mostly we’re looking at the actual data, but you know, you must look at those market screens and see how I know

Fox: when the year was wrapping up and Jerome Powell was talking and telegraphing what you guys seem to indicate where maybe three rate cuts, the year end right now and the markets were already doubling that up and saying they would happen as soon as March. How do you tap in that down? I talked to a number of Fed officials who had since been saying rates might have to say you know higher or this level longer yet, you know, the market pressure is to cut. What do you say?

Goolsbee: My starting point is, you know, I was Paul Volcker was my great mentor and friend, and Paul used to always say our job is to act and the markets job is to react and let’s not get the order mixed up. And so as always kind of start from that. In this case, I do think there was a little bit of a mix up in the market, about how the Fed Open Market Committee works. That is to say, we debate as a body and vote on today’s actions. We don’t debate and vote on future. We don’t make future decisions. Every quarter we individually put out these forecasts the statement of economic projections, and that SEP statements which are individual we don’t get this see what the other people are doing. They looked at that and they said ah see the Fed has decided that they’re going to cut the rates three times four times whatever, in the course of the year, but they were getting a cart before the horse race is gonna be actual data.

Fox: I’m sorry, but they do that often. And you and I talked about this in the past in different capacities. And they always gonna overreact or overtake something and I guess you have to deal with that. But I do wonder whether you feel the need now and then I gotta clarify something for these budget heads. I don’t know what it is, but they’re running. They’re chasing something that’s just not right. Do you feel a need to correct that or like, oh, Volker did No, let them react away. And we’ll do what we do.

Goolsbee: I’m more in the Volcker camp of, there’s nothing in the mandate of what the Feds job is to make the market feel good. You know, we got to watch the data. The thing that is going to drive, when and how much rates will be cut. This in this coming year, is going to be whether we’re getting inflation back to target and the actual numbers in the economy. So I’m, I’m a more of a fan that let the market react to the data rather than to the Fed statements. All right. Well, I tried to maybe you stumbled upon an international monetary crisis point, but I failed, but maybe I’ll do that again.