Chicago Fed President Goolsbee has said that if economy deteriorates, the Fed will 'fix it'
In a CNBC interview, Goolsbee stated that the Fed is ready to address any economic setbacks and reaffirmed its commitment to its core objectives: maintaining price stability, maximizing employment, and ensuring financial stability. “If there’s deterioration in any of these areas, we’re going to address it,” Goolsbee emphasized.
His remarks came amid a global sell-off that battered stock markets worldwide. Despite the turbulence, Goolsbee made it clear that the Fed’s decisions would not be driven solely by market fluctuations.
“It’s the market’s role to react and the Fed’s role to act,” Goolsbee said. “And one of those roles involves a lot more volatility than the other.”
His reference to volatility was likely aimed at the market’s tendency for sharp, unpredictable movements, such as those observed on Monday when investor concerns about a weakening economy led to significant declines. On that day, the Dow Jones dropped 952 points, while the S&P 500 and Nasdaq Composite fell by over 3%. The Nikkei index was hit particularly hard, plunging up to 13% at one point. “It seems like there’s a lot going on in the world,” Goolsbee noted.
Investors have been especially worried about last week’s jobs data, which showed an increase in the unemployment rate to 4.3% in July from 4.1% the previous month. Rising unemployment rates can signal a potential recession, prompting economists to assess whether this spike is a temporary blip or the beginning of a trend. Goolsbee did not interpret the data as a recession signal, stating, “Jobs numbers came in weaker than expected, but it’s not yet looking like a recession.”
However, due to these numbers, the Fed is now paying closer attention to unemployment, according to Goolsbee. Previously, the Fed could focus primarily on inflation due to the strong job market. With the labor market softening and unemployment rising monthly since March, the Fed now has to more actively balance its dual mandate. “With some weakness in the job market, we need to pay attention to that,” Goolsbee said.
He framed the recent unemployment data and Monday’s market sell-off as just a part of the broader range of economic indicators the Fed must consider in its future decisions. “That’s the Chicago motto: There’s no bad weather, only bad clothing,” he said. “Conditions change, and we’ll respond appropriately.”
Economists and investors largely expect the Fed to cut rates at its next meeting in September. At the most recent Fed meeting, Chair Jerome Powell suggested that rate cuts “were on the table” for September. Goolsbee remained cautious, emphasizing the need for timely responses. “It’s a huge table, and everything is always on the table,” he said.