Federal Reserve's Goolsbee: It is premature to cut interest rates due to expected productivity gains; only a decline in inflation will lead to rate cuts.

Odaily Planet Daily reports that Federal Reserve Governor Goolsbee stated it is premature to bet that productivity gains can lower inflation now; only when inflation decreases would it be appropriate to cut interest rates. Goolsbee said he expects a rate cut this year, but only if inflation returns to the Fed’s target level. The downward trend in inflation has halted, and core services inflation excluding housing remains stubbornly high. He also mentioned that it is unclear whether current interest rates are restrictive, so the Fed needs to stay vigilant. Premature rate cuts based on expectations of productivity improvements could lead to an overheating economy. Regarding the labor market, Goolsbee believes that the current low hiring and firing levels are driven by uncertainty, which may persist even after the Supreme Court rules on tariffs. However, he thinks the current economic growth and labor market are not fragile. On the Fed’s balance sheet, similar to Fed Governor Waller’s comments, Goolsbee said any discussion about returning to a scarce reserve system requires further examination of its pros and cons. (Jin10)