Chicago Fed President Austan Goolsbee, in an interview with Marketplace overnight, expressed concerns about the risks of maintaining high interest rates for an extended period. Goolsbee emphasized the importance of adjusting the level of restrictiveness in monetary policy as the economy moves closer to inflation target.
He likened this to cooking a turkey, suggesting that just as a turkey should be removed from the oven before it’s fully done to account for “residual heat”, similarly, monetary policy should be eased before inflation hits the target to prevent overshooting.
Goolsbee noted that “once you believe that you are on the path to get inflation to target, then the amount of restrictiveness that you need to apply needs to be less.”
Additionally, Goolsbee highlighted the progress made in controlling inflation, particularly outside the food sector. He pointed out that inflation has been coming down, and although it hasn’t reached the target level yet, 2023 is on track to see the largest drop in the inflation rate in 71 years.
