Chicago Fed President Revises Rate Cut Expectations

On Friday, Austan Goolsbee, President of the Chicago Federal Reserve, announced a less steep path for rate cuts in 2025 than previously predicted. However, he indicated that the U.S. central bank's policy rate is still expected to decrease by a prudent amount in the coming year.

Goolsbee attributed his adjusted outlook to the uncertainties surrounding policy, which complicate predictions regarding the neutral and inflation rates. Despite this uncertainty, he noted that inflation seems aligned with the Federal Reserve's 2% target.

He mentioned that, with the current policy rate considerably above an anticipated final level of about 3%, a decline in inflation will require the Federal Reserve to lower rates significantly in the next 12 to 18 months.

Earlier, Goolsbee believed rates would need to drop by 100 basis points within the next year, agreeing with other policymakers. However, recent projections released after the Fed cut its policy rate by a quarter percentage point to a range of 4.25%-4.50% suggest that most central bankers now expect only 50 basis points of cuts in the upcoming year.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.