On Monday, Austan Goolsbee, President of the Federal Reserve Bank of Chicago, made a “dovish” case for think about lowering interest rates in the coming months.
Going over on CNBC, Goolsbee said that the U.S. central bank should at least think about whether its policy rate needs to be as high as it is now because there are new signs that the economy is under stress.
Goolsbee said, “There are a couple of warning signs.” He pointed to “what seems to be a cooling of consumer spending,” along with a recent rise in jobless claims and a rise in credit card debt that is past due.
He also said that the Fed’s policy rate, which takes inflation into account, is the highest it has been in decades and is pushing the economy down.
“Then you would have to start questioning whether we should stay as restrictive as we have been,” he said. “If there are more positive inflation reports like the most recent May consumer-price-index report and more evidence of slowing economic conditions.”
“It’s interesting to think about where we stand on our scale of restrictiveness,” Goolsbee said.
He said that the Federal Reserve raised its key interest rate to where it is now to keep the economy from getting too hot. He said that the economy’s recent signs of weakness at least show that it is not getting too hot.
Monday, San Francisco Fed President Mary Daly said in a different speech that she thought the economy might be in danger.
She said that so far, the unemployment rate has been slowly going up while inflation has been going down.
“We are getting closer to a point where the effects on jobs might not be so good,” Daly said.
According to new information, companies aren’t posting as many job openings as they used to. She said this means that if the job market keeps getting worse, companies might have to cut real jobs.
On Monday afternoon, the yield on the 10-year Treasury note BX:TMUBMUSD10Y went down a little.
