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Goolsbee Signals Slight 2025 Rate Hike But Foresees Borrowing Costs Declining

Word on the StreetFriday, Dec 20, 2024 12:01 pm ET

1min read

Chicago Federal Reserve President Austan Goolsbee has indicated a slight upward revision to his interest rate outlook for 2025, yet he maintains an optimistic view that borrowing costs are set to decrease over the next 12 to 18 months.

In a recent interview, Goolsbee remarked, "I've adjusted the path for 2025 rates slightly upward, but the overall trend remains a significant drop in inflation." He expressed confidence that the economy is progressing towards the Federal Reserve's 2% target, anticipating that interest rates will exhibit a notable decline in the coming months.

Last Wednesday, the Federal Reserve executed its third consecutive rate cut, bringing the target range down to 4.25%-4.5%. Policymakers signaled a potential slowdown in the pace of rate cuts in the upcoming year, projecting only two cuts in 2025.

With Goolsbee holding voting power on monetary policy decisions next year, he aligned with Federal Reserve Chair Jerome Powell's characterization of the current policy as "notably restrictive." Goolsbee observed that the policy is still distant from reaching what is considered a neutral interest rate level.

He also welcomed the better-than-expected inflation data released earlier on Friday, asserting his belief that inflation continues to move towards the central bank's goal of 2%.

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