Chicago Fed. Reserve head: 'Too early' to declare inflation victory
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President of the Federal Reserve Bank of Chicago Austan Goolsbee told CBS that 2023 is projected to look like a very "substantial reduction in inflation" without a spike in unemployment.
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Shoppers visit the Christmas Village in Philadelphia, Wednesday, Dec. 13, 2023 (AP Photo/Matt Rourke)
Despite what he described as "a lot of progress," President of the Federal Reserve Bank of Chicago Austan Goolsbee stated on Sunday that it is "too early" for the US Federal Reserve System (Fed) to declare success in the fight against inflation.
Goolsbee detailed to CBS News that "It's too early to declare victory. We made a lot of progress. So the thing to remember is every time in the past that the Fed or other central banks around the world have had to get inflation down a lot."
Goolsbee further explained that 2023 is projected to look like a very "substantial reduction in inflation" without a spike in unemployment.
"That's the golden path that I talked about, but we're still above the target."
The US Federal Reserve System held interest rates at 5.25-5.5% on Wednesday and reduced the country's inflation projection for 2023 and 2024, boosted the GDP growth forecast for 2023, and maintained the unemployment level forecast for 2023 and 2024.
The Fed predicts that the target inflation level will be reached in the United States in 2026.
Meanwhile, Federal Reserve Chairman Jerome Powell stated on Wednesday that while the current status of the US economy doesn't suggest a recession, uncertainties regarding growth and inflation make future developments unpredictable.
"I think you can say that there's little basis for thinking that the economy is in a recession now," Powell said.
He further emphasized that a recession within the next year is a possibility, though not guaranteed, and there are ongoing risks.
"I think there's always a probability that there will be a recession in the next year and it's a meaningful probability, no matter what the economy's doing, so it's always a real possibility. This result is not guaranteed. It is far too early to declare victory. And there are certainly risks. It's certainly possible that the economy will behave in an unexpected way. It has done that repeatedly in the post-pandemic period," he said.
Misleading estimates
Al Mayadeen analysts estimate that the data is misleading of the real situation on the ground. The longer the Fed keeps interest rates high, the inevitable lag effect will impact the economy.
They also anticipate several headwinds that will keep borrowing costs higher for a longer duration in the US.
One of them is continued war spending. The government will likely borrow another $100 billion from investors to aid Ukraine and "Israel."
This implies that more bonds will be issued to the market, increasing the supply of US debt, and bond yields will remain high.
Just recently, US President Joe Biden has pledged to send an additional $200 million in aid to Ukraine, as discussed in a meeting with Ukrainian President Volodymyr Zelensky.
This comes after Congress Republicans blocked a bill to send military aid worth almost $60 billion to Kiev. Republicans are ever-more openly rejecting the need to fund Ukraine, saying that President Joe Biden needs to devote more attention to domestic security, particularly to stopping illegal migration over the US-Mexican border.
