Last week, the Fed, as expected, raised interest rates by 25 basis points. This was the first rate hike since 2023, and market expectations are growing that further rate increases may occur in October or December.
As the Federal Reserve’s interest rate decisions for the remainder of 2026 are closely watched, Chicago Fed President Austan Goolsbee said the Fed should act decisively when necessary to combat inflation.
According to Reuters, Goolsbee stated at a meeting in London that he would not oppose interest rate cuts if inflation slowed significantly toward target levels.
Goolsbee said the Fed needs to have the courage to respond to inflation. He expressed optimism that the Fed can bring inflation back to its 2% target, provided there are no signs of overheating demand, adding that officials are still analyzing how much of the inflation is due to supply shocks and how much is due to demand.
He pointed to the strong performance in artificial intelligence investments and the impact of ongoing supply shocks on inflation.
Goolsbee stated that as of July, US PCE inflation was at 3.7 percent, and that achieving the 2 percent target depended on easing supply pressures.
Goolsbee’s Message on FED Independence and Inflation!
Goolsbee also stated that expectations that the Fed should lower federal government borrowing costs demonstrate the importance of central bank independence. He emphasized that the Fed should set its monetary policy in line with its inflation target.
Bessent Sends a Message of Confidence to Warsh!
U.S. Treasury Secretary Scott Bessent spoke to CNBC following the Federal Reserve’s latest interest rate hike. In his assessment, Bessent reiterated his confidence in Fed Chairman Kevin Warsh and stated that President Donald Trump also has confidence in Warsh.
Bessent also noted the liquidity conditions in the markets, stating that the Treasury had increased the size of its bond repurchase program.
The announcements come at a time when US monetary policy and the Treasury’s interventions in the bond market are being closely watched.
*This is not investment advice.
