Chicago Federal Reserve President Austan Goolsbee said Tuesday that a soft landing was still possible as the central bank tries to combat inflation without significantly harming the economy.
“Because of the strangeness of this moment, there is a possibility that the golden path … has brought down inflation without a recession,” Goolsbee said on CNBC’s “Squawk Box.” “If that were to happen … it would just be a continuation of what we’ve already seen this year, which is a very modest increase in unemployment while inflation has fallen sharply. … That’s our goal.”
The Fed held interest rates steady last week, the second straight meeting the Federal Open Market Committee decided after a series of 11 rate hikes.
Core inflation, measured by the private consumption expenditure price index, is currently at 3.7% on an annual basis, still well above the Fed’s annual target of 2%. Goolsbee emphasized that the reduction in price pressure so far is already a major achievement.
“The fastest decline in the inflation rate on record was in 1982,” Goolsbee said. “We’ll see what happens in the next few months. We could have the fastest rate of inflation decline in the last century. So we are making progress on the inflation rate.”
The economy has held up well so far despite the tightening measures of the last year and a half. Gross domestic product grew by 4.9% on an annual basis in the third quarter, even exceeding increased expectations.
Goolsbee stressed that finding such a “golden path” in the face of a historic surge in inflation will not be an easy task.
“What is unusual for a soft landing of this magnitude is that there has never been a decline in the inflation rate to bring inflation down to the level we can achieve without a major recession. That basically never happened,” he said. “Let’s shoot to make it happen.”
The Fed chairman said the central bank would rely on data going forward, echoing comments made by Chairman Jerome Powell last week.
Powell previously said the central bank had not yet made any decisions for its December meeting, saying: “The committee will always do what it deems appropriate at that time.”