Goolsbee: Fed Sees Slow Rate Cuts Amid Economic Uncertainty

Federal Reserve Bank of Chicago President Austan Goolsbee highlighted the challenges posed by fiscal policy uncertainty, including trade tariffs, which may slow the pace of interest rate cuts despite a full-employment economy and falling inflation. Goolsbee emphasized that while inflation is cooling towards the Fed's 2% target, the impact of tariffs and other policy changes creates uncertainty that necessitates a cautious approach. He noted that the Fed is currently on hold, but anticipates that the policy rate will be significantly lower over the next 12-18 months. The neutral policy rate is expected to take longer than 2025 to achieve, with a gradual approach necessary to avoid overheating the economy. Goolsbee's comments underscore the complexity of calibrating monetary policy amidst uncertain economic conditions, where external factors like tariffs play a significant role. Despite these challenges, Goolsbee remains optimistic about achieving the Fed's inflation and employment targets.