Chicago Federal Reserve President Austan Goolsbee said Tuesday a soft landing is still on the table as the central bank seeks to combat inflation without hurting the economy significantly.
“Because of some of the strangeness of this moment, there is the possibility of the golden path … that we got inflation down 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 unemployment up very modestly, while inflation has come down a lot. … That’s our goal.”
The Fed held interest rates steady last week, the second consecutive meeting that the Federal Open Market Committee chose to hold, following a string of 11 rate hikes.
Core inflation, per the personal consumption expenditures price index, is currently running at 3.7% on an annual basis, still well above the Fed’s 2% annual target. Goolsbee emphasized that the drop in price pressures so far has already been a great achievement.
“The fastest drop in the inflation rate in any year was 1982,” Goolsbee said. “We’ll see what happens over the next couple of months. We might equal the fastest dropping inflation in the last century. So we’re making progress on the inflation rate.”
The economy has held up well so far amid the tightening measures over the past year and a half. Gross domestic product expanded at a 4.9% annualized rate in the third quarter, stronger than even elevated expectations.
Goolsbee stressed that accomplishing such a “golden path” against a historic surge in inflation won’t be an easy task.
“Unusually for a soft landing of this magnitude, there has never been an inflation rate drop, to get inflation down as much as as we’re getting it down without a big recession. That’s basically never happened,” he said. “Let’s shoot to try to manage that.”
The Fed President said the central bank will be data dependent going forward, echoing Chair Jerome Powell’s comments last week.
Powell previously said the central bank hasn’t made any decisions yet for its December meeting, saying that “The committee will always do what it thinks is appropriate at the time.”