'Fed Dovish' Goolsbee: "No Decision Yet on September FOMC"

"Nothing has been decided." Ostan Goolsby, president of the Chicago Federal Reserve Bank and a leading dove within the U.S. Federal Reserve (Fed), stated that all options regarding interest rate hikes are being considered for the upcoming September Federal Open Market Committee (FOMC) meeting.

[Image source=Reuters Yonhap News]

In an interview with Yahoo Finance released on the 31st (local time), President Goolsby said that no decision has yet been made on whether to raise or hold rates at the September meeting. He indicated that "nothing has been ruled out on the table. Nothing specific has been raised on the table," suggesting that all cards are possible. He also emphasized, "Between now and September, when the next FOMC meeting takes place, we will obtain several important observations on inflation and the labor market," adding, "We will closely monitor future data."

Regarding the recent clear slowdown in inflation, President Goolsby described it as "just one month's data" but evaluated it as "quite a good figure." Earlier, the core Personal Consumption Expenditures (PCE) price index for June, a preferred inflation gauge by the Fed, rose 4.1% year-over-year, marking the lowest level since September 2021. He mentioned that core inflation in housing, services, and other areas is also trending downward, explaining, "It was unexpected and a nice bonus that the most challenging parts of inflation have shown some progress."

In particular, President Goolsby emphasized that the Fed is on the "golden path" to lowering inflation without causing a recession. He added, "If we can do this, it would be a historic victory." Goolsby has been a prominent dove arguing that since there is a lag before cumulative tightening is confirmed in the real economy, additional tightening could unnecessarily cause a recession and job losses.

In the market, expectations for a soft landing continue alongside views that the Fed's rate hikes are nearing their end. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market currently reflects more than an 82% probability that the Fed will hold rates steady at the next September FOMC meeting as of this afternoon. Although the dot plot presented by the Fed in June allows for one more rate hike this year, the market currently favors a hold scenario through the end of the year. The probability of an additional hike this year stands at around 25%.

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