Fed's Goolsby Charts 'Golden Path' At Jackson Hole

Financial magnates congregated at the annual Jackson Hole Economic Policy Symposium on Friday, and all ears were on the Federal Reserve’s policy direction.

With Fed Chair Jerome Powell laying out the blueprint, Chicago Fed President Austin Goolsby carved out his distinct perspective in an interview with CNBC’s Steve Liesman. Here's what you need to know.

The Golden Path

Central to Goolsby’s commentary was his vision of the so-called ‘golden path’ — his optimal trajectory where the Fed reins in inflation without plunging the economy into a deep recession.

Related: Wall Street’s Verdict On Powell’s Jackson Hole Address: A Balanced Play On Interest Rates

While Powell’s narrative revolved around possible rate hikes to ensure price stability, Goolsby gave room to optimism. The past months, in his view, hadn’t veered off that path.

Liesman pointed to Powell’s assertion on the likely necessity of below-potential growth to curb inflation. Here, Goolsby reiterated that achievement would be to hit the Fed's 2% inflation target without economic disruption. Though he said that achieving it without any growth interruption would be raising the bar, as it is unprecedented.

To Hike Or Not To Hike?

Knowing his live-streamed answer would affect the markets, Goolsby threaded cautiously on further hikes. His stance hinged largely on incoming data on prices and inflation.

With the recent data trajectory, Goolsby hinted that deliberations might incline towards keeping current rate levels rather than increasing them (Philadelphia Fed President Patrick Harker indicated the same).

Goolsby also highlighted the buoyancy of consumer spending amid climbing interest rates. Sectors like auto, despite the rate upswing, saw upticks even as the Fed was raising rates — possibly a byproduct of pent-up demand and past supply snags. Goolsby said.

The Last Stretch From 3% To 2%: As the dialogue shifted towards the reduction of inflation from 3% to the coveted 2% mark, Goolsby’s standpoint was clear. The Fed is going to get inflation to 2%, even if it has to be patient with it.

Precision in inflation targeting, Goolsby suggests, might be a narrow lens to peek through. With inherent inflation volatilities, he reiterated a more expansive view on setting and evaluating targets.

Wrapping up the discourse, Goolsby affirmed a commitment to the 2% target, echoing a sentiment that permeates the Federal Open Market Committee’s broader projections.

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