Chicago Fed President Austan Goolsby on Thursday expressed hesitation about cutting interest rates further as the government shutdown disrupts key inflation data.
Goolsby has advocated gradual rate cuts, but central bank officials said in an interview with CNBC that they were concerned about the lack of significant price reporting, especially after a recent upward trend in general inflation.
“If there’s a problem on the inflation side, it’s going to take a long time to see it, but if the job market starts to deteriorate, you’ll see it almost immediately,” Goldsby said. “So I’m even more worried because we’re bringing forward rate cuts and assuming that the inflation we’ve seen over the past three months is just temporary and will go away.”
Goolsby spoke as the Chicago Fed updated its own labor market indicators dashboard. This series of data showed that the unemployment rate remained stable in October, with hiring and firings continuing at a steady pace. The Chicago Fed’s unemployment rate index for the month was 4.36%, up just one-hundredth of a point from September.
However, the Bureau of Labor Statistics will not release its October Consumer Price Index report as scheduled next week.
BLS released its September report despite the closure. That’s because that special number is used in Social Security’s cost-of-living adjustment. The report showed that inflation is running at an annual rate of 3%, compared to the Fed’s target of 2%. Whether the Commerce Department releases the Fed’s preferred measure, the Personal Consumption Expenditure Price Index, will depend on whether the lockdowns are resolved.
Goolsby said the lack of inflation reporting was a concern because trends in the three months before the government shutdown showed core inflation, which excludes food and energy prices, was running at an annualized pace of 3.6%.
“Over the medium term, I’m not a hawk on interest rates. I think the settling point for interest rates will be well below current levels,” he said. When it’s foggy, be a little more careful and slow down.
Goolsby will have the vote to decide whether to cut rates again at the Federal Open Market Committee meeting in December, following cuts in the previous two meetings. However, he plans to become an alternate candidate in 2026 and return to voting rights in 2027.
