We Are On A 'Golden Path' To Lower Inflation Without Recession, Fed's Goolsbee Says

The Federal Reserve has found a golden path to reduce inflation without resorting to recession, according to Chicago Fed President Austan Goolsbee. While speaking on CNBC, the Fed official emphasized that the latest data from June’s nonfarm payrolls support this optimism.

Lowering Inflation sans Recession

Goolsbee believes that the data from June reveals a slowing pace of job creation, which coupled with rising wages, is beneficial for combating inflation, he told CNBC. “What the Fed's overriding goal right now is to get inflation down. We're going to succeed at it and to do that without a recession would be a triumph,” he said.

This belief is supported by a view that the rise in wages and decline in job creation is a good sign. The logic is simple: when wages rise, people are able to spend more, which should stimulate the economy. And, if job creation slows, it could potentially reduce inflationary pressure.

Also Read: 5 Experts On June Jobs Surprise Data: ‘All But Ensures Fed Rate Hike,’ Says 1 Economist

Further Tightening Still Needed

According to Goolsbee, the golden path is not just about economic theory, but also about practical measures that could include higher interest rates, tighter fiscal policy and more. “I haven’t seen anything that says 1 or 2 more rate hikes this year is wrong,” he said, adding that “there are modest increases in rates to come, timing is a question.”

Implication for Investors

Investors should keep a keen eye on the Federal Reserve’s policy and data trends. Changes in monetary policy could affect the performance of public companies and the overall market. For example, companies like Goldman Sachs Group Inc. GS and JPMorgan Chase & Co. JPM are sensitive to interest rate changes. ETFs like Vanguard Total Stock Market ETF VTI and iShares Core S&P 500 ETF IVV could also be impacted.

Now Read: Yellen Calls Out China’s Unfair Treatment Of U.S. Companies, Aims To Revive Economic Ties, Semiconductor

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo: Shutterstock and Fortune Brainstorm TECH on flickr