Fed's Goolsbee: Rates can go down a fair bit over the next year

Fed's Goolsbee: Rates can go down a fair bit over the next year

Investors are closely watching the Federal Reserve's monetary policy, with Chicago Fed President Austan Goolsbee suggesting that interest rates could decrease significantly over the next year. This prediction comes amid ongoing uncertainty surrounding U.S. tariff threats and inflation data, which are expected to influence the Fed's decision-making process.

According to Goolsbee, the latest tariff threats from President Trump have complicated the inflation outlook, making it more difficult to support immediate rate cuts. He noted that the pause in tariffs in April had initially calmed concerns about price increases, but recent developments have reintroduced uncertainty. This could potentially delay the Fed's plans to lower interest rates.

Market expectations for rate cuts are currently mixed. U.S. money markets currently price in less than a 7% chance of a 25 basis-point rate cut on July 30 and a 71% chance of a reduction in September. However, rate cuts are fully priced in for October and December [1].

Inflation data, which will be released this week, will be a key focus for investors. The U.S. Consumer Price Index (CPI) is expected to rise by 0.3% in June, according to economists' forecasts. This data, along with other economic indicators from around the world, will provide valuable insights into the Fed's potential actions.

In addition to the tariff threats, the economic outlook remains positive, with economists expecting stronger job growth and lower recession risks. However, higher tariffs could potentially weaken the eurozone economy and prompt the European Central Bank to lower borrowing costs further.

Investors should remain vigilant as the Fed continues to navigate these complex economic conditions. The upcoming data releases and the Fed's monetary policy decisions will be critical in shaping market expectations and influencing financial markets.

References:
[1] https://www.morningstar.com/news/dow-jones/202507142445/latest-tariff-threats-could-delay-rate-cuts-chicago-feds-goolsbee-says-cpi-data-in-focus-this-week
[2] https://www.reuters.com/business/finance/why-trumps-push-1-fed-policy-rate-could-spell-trouble-us-economy-2025-07-14/