Fed official leaves door open to rate hike pause in September

A Federal Reserve official left open the possibility on Monday of pausing or stopping interest rate hikes at the central bank’s next policy meeting in September, saying “there’s nothing off the table.”

“Thus far we’re on the golden path and we’ve got to walk that line,” Chicago Fed president Austan Goolsbee said in an interview on Yahoo! Finance, referring to the path of lowering inflation without triggering a major recession.

But he signaled as well that the Fed will continue to be data dependent in making its next rate decision.

To rein in surging costs of living, the Fed has lifted the benchmark lending rate rapidly since March 2022, and most recently raised rates to the highest level in 22 years.

While the full effect of policy will take time to ripple through the economy, inflation has cooled and retail sales is showing signs of easing, even as the labor market remains robust.

“We’ve never been able to get inflation down even as much as we’ve gotten it down so far without a recession,” Goolsbee said.

“It’s looking like we’re walking the line pretty well,” he added, calling it “fabulous news” to see inflation coming down.

But policymakers will have to “play by ear” when it comes to the restrictiveness of the policy rate, he said, signaling that the Fed will have to closely eye economic data in the coming months.

Asked about the impact of regional bank failures earlier this year — including the dramatic collapse of Silicon Valley Bank — Goolsbee noted a stabilization in the sector. — Agence France-Presse