Fed's Goolsbee anticipates shallower rate-cutting path in 2025

Investing.com -- The President of the Chicago Federal Reserve, Austan Goolsbee, revealed on Friday that he now expects a less steep path for rate cuts in 2025 compared to his earlier predictions. Despite this, Goolsbee maintained that the U.S. central bank's policy rate is likely to decrease by a judicious amount in the coming year.

Goolsbee explained his revised outlook, acknowledging that the uncertainty surrounding policy makes it difficult to accurately predict the neutral rate and inflation rate. This uncertainty has led to his more conservative expectations for the 2025 rate path. Nevertheless, he emphasized that inflation appears to be on track to meet the Federal Reserve's 2% target.

With the current policy rate significantly above its projected final level of around 3%, Goolsbee stated that the decreasing inflation will necessitate the Federal Reserve to lower it substantially over the next 12 to 18 months.

Previously, Goolsbee had suggested that rates would need to decrease by 100 basis points in the next year, a viewpoint that was in agreement with his fellow policymakers. However, this week's projections, released after the Fed reduced its policy rate by a quarter of a percentage point to a range of 4.25%-4.50%, indicate that most U.S. central bankers anticipate only 50 basis points of cuts in the coming year.

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Source: Investing.com