Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee hit markets on an already-volatile Friday with more bad news, noting that inconsistent policy approaches from the US government cause a high level of economic uncertainty that make it difficult for the Fed to draw a bead on where the economy, and inflation specifically, are likely heading.
This was a solid jobs report.
Tariffs add a little uncertainty.
The potential of escalating trade wars throwing a wrench into supply chains is very real.
I am hopeful, after what we saw recently, that tariffs end up not being a big impediment to trade.
I'm comfortable with path of the economy.
Consumer survey showing jump in near-term inflation expectations is less influential to me.
Wage growth is about consistent with 2% inflation.
Longer-run market-based inflation expectations show the market believes the Fed will get inflation to 2%.
One-time tariff is a transitory shock.
Retaliation would complicate impact of tariffs.
I see the neutral rate a fair bit lower than where we are today.
The Fed are on hold now, but over next 12-18 months, the settling policy rate will be a fair bit below where it is now.
The speed at which rates come down will be slower with more fogginess.
We need to get to settling rate on a judicious timetable.
What's happening in longer-run rates is not our target; that's more the purview of the Treasury.
I think it will take longer than end-2025 to get to neutral policy rate.
I think we are on path to 2% inflation.
I don't think the Fed would play a role in any sovereign wealth fund.