Chicago Federal Reserve President Austan Goolsbee said Tuesday that a soft landing was still on the table as the central bank sought to combat inflation without significantly harming the economy.
“Because of the strangeness of this moment, there is the possibility of following the golden path … that we could bring down inflation without a recession,” Goolsbee said on CNBC’s “Squawk Box.” “If that happened… it would just be a continuation of what we’ve already seen this year, which is a very modest rise in unemployment, while inflation has fallen a lot…. That’s our goal.”
The Fed held interest rates steady last week, the second consecutive meeting the Federal Open Market Committee has chosen to hold, following a series of 11 rate hikes.
Core inflation, according to the personal consumption expenditure price index, currently stands at 3.7% on an annual basis, which remains well above the 2% annual target of the Fed. Goolsbee stressed that the reduction in price pressures so far is already a great achievement.
“The fastest decline in the inflation rate of any year was 1982,” Goolsbee said. “We’ll see what happens over the next few months. We could match the fastest decline in inflation in the last century. So we’re making progress on the inflation rate.”
The economy has so far resisted the tightening measures implemented over the past year and a half. Gross domestic product grew at an annualized rate of 4.9% in the third quarter, better than even high expectations.
Goolsbee stressed that achieving such a “golden path” against a historic surge in inflation will not be an easy task.
“Unusually for a soft landing of this magnitude, there has never been a drop in the inflation rate, to bring inflation down as much as we do without a big recession. It has almost never happened. never produced,” he said. “Let’s shoot and try to deal with this.”
The Fed chair said the central bank would now depend on data, echoing comments from Chairman Jerome Powell last week.
Powell previously said the central bank had not yet made a decision for its December meeting, saying “the committee will still do what it deems appropriate at that time.”