Fed’s Goolsbee says he is watching for other ‘credit shoes’ to drop
FILE PHOTO: Austan Goolsbee, Professor of the University of Chicago, speaks during the Obama Foundation “Democracy Forum” in New York City, U.S., November 17, 2022. REUTERS/Brendan McDermid
(Reuters) – Chicago Federal Reserve Bank President Austan Goolsbee said on Wednesday that after the failure of two large regional Fed banks last month roiled the financial sector, he is waiting to see “whether there are other credit shoes to drop.”
“Not in the crisis sense, but in the how much squeezing is going to be coming up from the bank side,” Goolsbee said in an interview with American Public Media’s Marketplace. “I think it’s going to matter for whether this economy is going to slow down.”
Goolsbee last month called for prudence and patience in policy-setting, and in the interview repeated those words, saying that tightening credit conditions may end up slowing inflation and the economy, replacing what might otherwise be the need for more monetary policy tightening.
But, he said, that does not mean he has decided whether the Fed needs to raise rates further at its upcoming May 2 to 3 rate-setting meeting, as financial markets and analysts expect it will.
“We still got a couple of weeks before the actual meeting, so if anybody imputed some specific basis points of what I was for, that’d be inaccurate,” he said.
In the next two weeks, he said, he will focus on prices and credit. Of note, he said, he will be looking at month-to-month inflation readings as giving a sense of recent trends; and he cautioned against paying too much attention to wages, which he said do not necessarily signal where prices are going.