Fed Officials Say Inflation Is Being Contained, but Remain Cautious on Rates

[Financial News New York = Lee Byung-chul, Reporter]Senior officials at the Federal Reserve (the Fed) expressed cautious optimism about recent improvements in inflation data. However, they also made clear that inflation is still well above target, and that it is not yet time to change the direction of monetary policy. As Chair Kevin Warsh has recently put price stability at the top of the agenda, there appears to be broad agreement within the Fed that a tight policy stance should remain in place for now.
In a CNBC interview on the 25th local time, Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said, "It is encouraging to see some improvement in service prices," adding, "Of the Fed's two mandates, inflation and employment, the bigger issue right now is clearly inflation."
He declined to comment on the future path of interest rates. Instead, he said, "It would be better to keep statements shorter, reduce forward guidance, and avoid speculating in advance about the rate path," backing the communication changes pushed by Chair Warsh.
Goolsbee also dismissed some interpretations that the Fed has become divided since Warsh took office. Referring to his experience working with Warsh on crisis response during the global financial crisis, he described him as "a serious person with fresh ideas."
Goolsbee's remarks came shortly after the core Personal Consumption Expenditures (PCE) Price Index released that day showed a 3.4% increase from a year earlier, the highest level since October 2023.
In May, goods prices rose 0.4% from the previous month, while service prices increased 0.5%. Energy prices jumped 6.5%, and transportation services, which are heavily affected by gasoline prices, also rose 0.8%, driving inflation higher.
John Williams, president of the Federal Reserve Bank of New York, said at an event in Jersey City, New Jersey, that he expects inflation to gradually slow.
He said, "Bringing inflation sustainably back to the 2% target is the most important thing," and added, "Current monetary policy is at an appropriate level to achieve that."
Williams cited three reasons for his view that inflation will ease: a reduced impact from tariffs, more stable energy prices after the end of the Iran war, and easing housing costs as rent increases slow.
He forecast that the current inflation rate of 4.1% would fall to 3.5% by the end of this year, then continue to decline gradually before reaching the Fed's 2% target in 2028.
Still, he stressed, "The economy can move in unexpected directions at any time, like a FIFA World Cup match," and added, "My commitment to lowering inflation to 2% while maintaining maximum employment has not changed."



pride@fnnews.com Reporter Lee Byung-chul Reporter