Goolsbee emphasizes Fed's wait on interest rates amid trade policy uncertainty
- Chicago Federal Reserve President Austan Goolsbee discussed the implications of President Trump's tariff threats on interest rate policies.
- He indicated that while the outlook for rates is lower, uncertainty surrounding trade policy necessitates a cautious approach.
- As the Fed evaluates these dynamics, changes to interest rates will likely be postponed.
In the United States, on May 23, 2025, Chicago Federal Reserve President Austan Goolsbee commented on the impact of President Trump's recent tariff threats on monetary policy. Goolsbee indicated that these threats have introduced significant uncertainty, affecting the Federal Reserve's plans to adjust interest rates. He mentioned that while there is an expectation for lower interest rates in the future, the Fed is likely to hold off on any adjustments until there is clearer evidence about the impacts of trade policies on inflation and employment. He stated that the situation has raised the threshold for any action in either direction. During a CNBC interview, Goolsbee discussed how Trump's announcement regarding a 50% tariff on European Union products and a 25% tariff on iPhones produced outside the U.S. has added to volatility in the markets. Despite the substantial implications these tariffs could have on specific companies, he believes the broader economic impact remains manageable. Goolsbee expressed that uncertainties surrounding trade policies complicate the Fed's decision-making process concerning interest rates. Looking ahead, Goolsbee maintained a cautiously optimistic view regarding economic growth. He stated that he believes the economy could return to solid growth over the longer term and that there may be potential for interest rates to decrease significantly within the next 12 to 18 months. However, he acknowledged that current circumstances require careful analysis before making any commitments about future rate adjustments. As a member of the rate-setting Federal Open Market Committee, Goolsbee emphasized the importance of the upcoming committee meeting set for June 17-18, where economic and interest rate projections will be updated. Although markets anticipate two rate cuts in 2025, Goolsbee refrained from specifying any actions, mentioning the need to stay flexible given the evolving nature of economic conditions and trade uncertainties.