A Federal Reserve official says he’s encouraged by Tuesday’s better-than-expected inflation report but, all things equal, needs to see “a lot” more like it before he would seriously consider supporting further interest rate cuts.
“It’s a benign report,” Austan Goolsbee, president of the Federal Reserve Bank of Chicago and a voting member of the Fed's rate-setting committee, told USA TODAY on May 13. “That’s comforting.”
The April inflation reading, combined with the 90-day pause on the highest tariffs on Chinese imports that President Donald Trump's administration announced Monday, paint a potentially brighter inflation outlook that could allow officials to resume rate cuts, Goolsbee said.
At the same time, he added, “When you have things that you know are coming down the pipe, we’ve just got to be more wary.”
Goolsbee's comments are noteworthy because he's generally considered one of the more “dovish” members of the Fed’s rate-setting committee. That means he may be more inclined than others to reduce rates to head off a recession than raise rates or keep them higher for longer to bring down inflation.
The Fed next meets June 17 through June 18.
Is the US inflation rate going down?
Last month, annual inflation dropped from 2.4% to 2.3%. the lowest in more than four years and moderately above the Fed’s 2% goal, the Labor Department’s consumer price index revealed May 13. Goolsbee said he didn’t see an impact from tariffs – which gradually took effect from February to April – in the inflation numbers.
Meanwhile, earlier in the week, Treasury Secretary Scott Bessent said the U.S. agreed to lower the 145% tariff on Chinese imports to 30% while China said it would cut its duties on U.S. shipments from 125% to 10% while the two sides continue to negotiate.
Assuming those fees are sustained, it would reduce the average U.S. tariff rate from about 24% to 13% and cut projected U.S. inflation by year’s end from about 4% to 3.5%, economists said. That would still be well above current inflation and the Fed’s target.
What percentage of GDP are imports?
Noting that imports comprise about 11% of America’s economy, Goolsbee said, “If you can keep it in its lane, the impact of tariffs on the macroeconomy might not be that large.”
If the lower tariffs are kept, the impact on inflation “would not be nearly as big,” but “it’s not like we’re going to just go back to what we had before… If you get above 10% (in the tariff rate), it can still be big.”
“There’s a lot of dust in the air," Goolsbee added, referring to the import fees that many economists say will start to notably affect inflation readings in July and grow in following months.