Forex – Chicago Fed President Austan Goolsbee told MarketWatch in an exclusive interview that the long-term trend in labor market and inflation data justifies easing the Federal Reserve’s interest rate policy soon and then steadily over the next year.
“In the long run, it shows that inflation has fallen significantly and the unemployment rate has risen faster than Fed officials expected in June,” Goolsbee said.
Given the more positive inflation data and less positive unemployment data, “it’s pretty clear that the path is not just a rate cut soon,” Goolsbee said, but multiple cuts over the next 12 months, as the Fed’s latest dot plot predicted.
Goolsbee said he sees “more” warning signs about the cooling labor market.
For months, officials have welcomed the cooling in the labor market and say it could lead to a sustained expansion.
But Goolsbee said the persistent weakness raises the possibility that the labor market could continue to cool and “turn into something much worse.” He said the Labor Department is set to release its August employment report on Friday, and the data could shed light on that critical question.
“The August employment report, in general, could help determine the size and pace of anticipated rate cuts,” Goolsbee said, adding that he would not put too much weight on one-month employment numbers. “I don’t want us to base our decisions on a single data point,” he said.
