The head of the Chicago Federal Reserve said Friday that the drop in inflation in May was a big step in the right direction. However, prices need to drop even more before U.S. interest rates can be lowered.
When asked about the May consumer price index report, Austan Goolsbee said, “That was a very good number.” For the first time in almost two years, the CPI showed that prices did not go up last month.
As the Fed ended a two-day meeting on Wednesday morning, the CPI was made public. The Fed also left a key short-term interest rate at a 23-year high.
Before Fed officials are sure that inflation is slowing down towards the bank’s 2% goal, they want to see more readings like the one from May.
At a meeting in Iowa, Goolsbee said, “We just need to see more progress.” Earlier on Friday, Loretta Mester, President of the Cleveland Fed, said similar things.
In the next few months, the Fed will get a lot more inflation data, which will give them a better idea of how prices are moving.
As of April, the Fed’s preferred measure of inflation, the personal consumption expenditures (PCE) index, showed that the rate was rising at a 2.7% rate. The goal is to get the annual rate of inflation back to 2%.
On Wednesday, the central bank made it sound like it might only lower rates once this year. But Fed Chairman Jerome Powell made it clear that the bank would be ready to lower rates even more if inflation started going down again after a break in the first four months of 2024.
The most recent data on retail and consumer prices showed that inflation stopped rising in May.
You can vote for Goolsbee on the Fed’s rate-setting panel this year.
