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Chicago Federal Reserve Bank President Austan Goolsbee said Sunday that the Fed’s fight against inflation isn’t over yet despite encouraging signs that inflationary pressures are easing without triggering a recession.

The Federal Open Market Committee (FOMC), which acts as the Fed’s policymaking arm, last week opted against an additional rate hike and instead chose to leave the benchmark federal funds rate unchanged at a range of 5.25% to 5.5% – the highest level in 22 years. The Fed began aggressively raising interest rates last year to tamp down inflation, which peaked at a four-decade high of 9.1% in June 2022 and has gradually declined to 3.1% this November, though it’s still well above the Fed’s 2% target.

In an appearance on CBS’ “Face the Nation,” Goolsbee said that the U.S. has “made a lot of progress in 2023, but I still caution everybody it’s not done. And so the data is gonna drive what’s gonna happen to rates.”

“It’s too early to declare victory,” Goolsbee said to host Margaret Brennan. “We made a lot of progress. So the thing to remember is every time in the past that the Fed or other central banks around the world have had to get inflation down a lot, it has basically always been accompanied by a major recession.”

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“We still get one more month of data, but 2023 looks like it’s going to end up being a very substantial reduction in inflation without a big increase in the unemployment rate, that’s the golden path that I talked about, but we’re still above target,” Goolsbee explained.

“We gotta get inflation down to target,” he added. “Until we are convinced that we’re on the path to that, it’s an overstatement to be counting the chickens.”

Goolsbee acknowledged that there has been some concerning economic data, such as a 12% year-over-year increase in homelessness, as well as delinquencies rising in credit card debt, auto lending and small business lending. He also noted that geopolitical risks like the war in Ukraine and the Middle East conflict between Hamas and Israel could weigh on the economy.

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The Federal Reserve building in Washington

“So if oil prices were to start rising substantially again, the way they have in the last few years, that would be a major supply shock problem facing the economy,” Goolsbee explained. “If we saw expansions of wars, if we saw collapse in China, if we saw a series of things around the world or if we got a big credit crunch in the United States and deterioration of the banking sector, all of those would be threats. And those kind of external shocks we call ‘em, they have derailed easier soft landings than this in the past in 1990 and 2001.” 

At the Fed’s policy meeting last week, the central bank’s economic projections showed that a majority of policymakers believed that interest rates would decline to 4.6% by the end of 2024.

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Federal Reserve Chairman Jerome Powell

That would suggest at least three quarter-point rate cuts next year, and none of the officials indicated that they see interest rates rising next year. Policymakers also penciled in additional rate cuts in 2025 and 2026.

The FOMC released a statement after its meeting saying that “inflation has eased over the past year but remains elevated” and said it would watch the economy to see if “any” additional rate hikes are needed.

“We added the word ‘any’ as an acknowledgment that we are likely at, or near, the peak rate for this cycle,” Federal Reserve Chairman Jerome Powell explained at a post-meeting press conference. “But participants also didn’t want to take the possibility of further hikes off the table.” 

FOX Business’s Megan Henney contributed to this report.

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