close
close

CEO of the Federal Reserve of Chicago gives ‘fireside chat’ at the Iowa Farm Bureau Economic Summit

Austan D. Goolsbee, president and CEO of the Federal Reserve Bank of Chicago, gave a “fireside chat” at the Iowa Farm Bureau Economic Summit held Friday in Ankeny, where he discussed important issues such as inflation and interest rates, especially as those two elements influence the economy.

What role does the Federal Reserve play?

“Our job is to maximize employment and stabilize prices and that’s what we call the ‘dual mandate’, that’s all we look at,” Goolsbee said.

And to do that, Goolsbee says, the Federal Reserve has only one tool: control over interest rates.

“We only have one tool and that tool is a screwdriver that we can tighten and loosen (the interest rate),” Goolsbee said.

Austan Goolsbee, president and CEO of the Federal Reserve Bank of Chicago, spoke Friday at the Iowa Farm Bureau Economic Summit in Ankeny.Austan Goolsbee, president and CEO of the Federal Reserve Bank of Chicago, spoke Friday at the Iowa Farm Bureau Economic Summit in Ankeny.

Austan Goolsbee, president and CEO of the Federal Reserve Bank of Chicago, spoke Friday at the Iowa Farm Bureau Economic Summit in Ankeny.

What is Goolsbee’s role as CEO of the Federal Reserve Bank of Chicago?

Goolsbee serves on the Federal Open Market Committee – the monetary policymaking body of the Federal Reserve System – and directs the Chicago Fed, which researches and monitors local economic conditions to support the formulation of monetary policies, supervises and regulates banking organizations and financial services. to banks and similar institutions, but also to the US government.

What is the main interest rate?

The prime rate is the interest rate that banks use as a basis to set rates for different types of loans, credit cards and lines of credit. Certain mortgage interest rates, such as adjustable rate mortgages, home equity loans and home equity lines of credit, may also be affected by the published interest rate. On Friday the primary interest rate stood at 8.50%. The prime rate was as low as 3.25% in March 2020.

Where is the economy strongest?

“Today, the labor market is the strongest in the economy, and that goes for the entire country. That’s even more true here, where the unemployment rate in Ankeny is 2%. The employment side of the mandate is therefore going well. And the failure was on the inflation side of the mandate,” Goolsbee said.

Some unusual economic events

“One is why inflation has risen so much and the other is why inflation hasn’t fallen faster. It went up like a rocket and now it’s kind of drifting down,” Goolsbee said.

Goolsbee said the pandemic has created some rather unusual circumstances in which spending on services such as haircuts fell, but demand for durable goods rose at a time when there were supply-side problems.

“I think a big part of the rising inflation came from all the supply chain issues that we found, and that may partly explain why inflation is persistent and persistent,” Goolsbee said.

When could interest rates fall?

“The short answer is that inflation must be reduced. If inflation falls, that’s easy. If inflation doesn’t come down, we have to get through it,” Goolsbee said.

The Federal Reserve Bank of Chicago.The Federal Reserve Bank of Chicago.

The Federal Reserve Bank of Chicago.

What is the target for inflation?

Goolsbee said federal policy since 2012 has been to keep inflation at 2%, a goal achieved in the last monthly report, but that inflation must be measured over time.

Goolsbee said 2% inflation could be achieved even as government spending and debt rise.

“In a narrow sense, certainly. Pre-COVID inflation was 1.8% for 10 years and we had big deficits and big debt,” Goolsbee said.

Is the US heading for a recession?

“We can avoid a recession completely. It’s worth keeping this in mind: until 2023, there has never been a year in which inflation fell as sharply as 2023 that wasn’t accompanied by a truly terrible recession. So the fact that we have lowered inflation significantly since the peak without a recession (a recession) and that the unemployment rate can still be 4% is a success. You have to accept success. It is not paradise, but for central bankers that is the best job we can do,” Goolsbee said.

This article originally appeared in the Des Moines Register: CEO of the Federal Reserve of Chicago does not foresee a recession for the US