Fed’s Goolsbee: The Fed needs to wait for the dust to clear
|Before committing to significant investments or other choices, US businesses were looking for continuity in trade policy, Chicago Fed President Austan Goolsbee said. He added that President Donald Trump's latest threat of 50% tariffs on European Union goods was a "scary" possibility for supply chains.
Key Quotes
- Businesses telling Fed they want consistency in policy before making big decisions.
- A 50% EU tariff is an order of magnitude different from current situation.
- Tariff rates that high would be scary for the supply chain.
- There is anxiety among firms that continued tariff announcements would disrupt the supply chain and lead to a rising price environment.
- In the short run the Fed needs to wait for the dust to clear, the bar for action is higher until that happens.
- If tariffs have a stagflationary impact then that is the central bank's worst situation.
- A fear is that data is lagged and upcoming reports will show a more serious impact from actions already taken.
- To the extent long-term yields are moving higher that can impact real activity directly, would factor into Fed analysis.
- Interest rates are still within historical ranges, if there was a crisis over US fiscal stability they would be moving higher.
- Still feel that underneath the volatility the economy remains strong, if tariffs and uncertainty were not a threat to inflation rates could eventually fall.
- Gratified that it looked like the Supreme Court acknowledged the importance of Fed independence.
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