Fed's Goolsbee Says He's 'Comfortable' With Interest Rate At 3% If Inflation Cools Down To 2%: Report

The Chicago Fed President stated that the neutral rate of interest is somewhere below the current levels.

Chicago Fed President Austan Goolsbee reportedly said on Tuesday that he is “comfortable” with the Federal Reserve bringing down the interest rate to 3% if inflation cools down to 2%.

In an interview with CNBC, Goolsbee stated that the neutral rate of interest is somewhere below the current levels. “If we are on the path to get inflation back down to where it’s supposed to be and where we promised we’re going to bring it, I think rates can come down some,” he said.

Goolsbee noted that while the Fed’s current monetary policy stance is “mildly restrictive,” the central bank needs to be cautious in cutting interest rates further. “Eventually, at a gradual pace, rates can come down a fair amount if we can get this stagflationary dust out of the air. But with inflation having been over the target for four-and-a-half years in a row, and rising, I think we need to be a little careful with getting overly, up-front aggressive.” he said in the interview.

Last week, the Fed cut the key borrowing rate by 25 basis points, bringing down the federal funds rate to the 4% to 4.25% range, in line with market expectations.

Meanwhile, U.S. equities were mixed in Tuesday’s opening trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.03%, while the Invesco QQQ Trust (QQQ) fell 0.07%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.

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