Austan Goolsbee, the representative of a dovish figure in the Federal Reserve, praised the latest CPI report on Thursday and said that US inflation seems to have returned to the track of 2%, so his confidence in the "timing of interest rate cuts is about to mature" has become stronger.
My opinion is that this is the path to 2%, "he said in an interview.
Gulsby said that the government report released earlier on Thursday showed that the consumer price index (CPI) slowed down in June beyond expectations, which is "excellent" news. Combined with the data from May, this series of data indicates that the stronger than expected inflation data earlier this year was just a "bump on the road" rather than a directional reversal.
Specific data shows that the non quarterly adjusted CPI annual rate in the United States recorded 3.0% in June, far below the market expectation of 3.1%, falling back to the lowest level since June last year. The seasonally adjusted CPI monthly rate for June recorded -0.1%, the first negative value recorded since May 2020.
Excluding food and energy costs, the core CPI increased by 3.3% year-on-year, lower than the market expectation of 3.4%, and fell back to the lowest level since April 2021. The core CPI in June increased by 0.1% month on month, the lowest level since August 2021, and the market expectation is 0.2%.
In addition, Thursday's report also showed a long-awaited easing of housing and rental inflation, which he said was "very encouraging".
However, Gulsby refused to disclose whether he would support a rate cut at the Federal Reserve's policy meeting on July 30-31. But he did say that the Federal Reserve's stabilization of the policy rate in the range of 5.25% -5.5% (which has been the case since July last year) actually means that the central bank is increasingly putting the brakes on the economy.
He added, "If you think the economy is overheated, you would take such strict restrictive measures. But in my opinion, this is not what an overheated economy looks like
Gulsby also said that although the labor market is still strong, it is cooling down and doesn't feel like the beginning of a recession. However, he did see some warning signals that the economy is slowing down, including last month's unemployment rate rising to 4.1% and an increase in default rates.
But he emphasized that due to the economic disruption caused by the pandemic, it is difficult to know exactly what these warning signals may indicate.
Gulsby stated that it is evident that the financial environment is "highly restrictive" and maintaining interest rate stability in the face of declining inflation is an undeniable tightening of policy by the Federal Reserve.
He further pointed out that once the Federal Reserve cuts interest rates for the first time, whether it will further cut interest rates and how quickly it will do so will depend on the data.
I don't like making promises in advance or being tied up, "he added.