Fed's Goolsbee: Not decided for what happens at next Fed meeting

Eren Sengezer FXStreet

Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee said on Monday that he would feel uneasy frontloading rate cuts, per Reuters.

Key takeaways

"I believe the place rates will settle is a fair bit below current levels."

"Golden path for economy is still possible."

"Rates should come down with inflation."

"Inflation data still is worrisome."

"I'm not decided for what happens at next Fed meeting."

"Threshold for cutting rates higher than at last two Fed meetings."

"More worried about inflation over job market risks."

"Some key job market metrics have been pretty stable."

"There are still concerns about job market."

"It is important to be careful when economy is in time of transition."

"Cautious about layoff data."

"The hiring rate is low, one of economy's weakest factors."

"Is unusual to have low hiring, low firing economy."

"Very hard to get timing right in time of transition."

"I am nervous about inflation side of the ledger."

Market reaction

The US Dollar Index showed no reaction to these comments, which received a neutral score of 5.2 from FXStreet Fedspeech Tracker, and was last seen gaining 0.15% on the day at 99.85.

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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