FED: Goolsbee On Still Solid Underlying Economy But Wary Of Uncertainty

Chicago Fed’s Goolsbee (’25 voter) from a NPR interview released earlier today. See below for a quick transcription from the playback here. He sees underlying hard data suggesting a still solid economy, which whilst of note for one of the most dovish members of the FOMC, is less surprising having told the NY Times earlier this week that "'If we could get the dust out of the air, it would make sense to think that rates would be going down […] But the bar for action has to be high when there's so much uncertainty.' He also talks on data lags and the extra importance of listening to people in real time.

• Q: Why were April's numbers better than expected? 

• Goolsbee: “Some part of it is the official data, they only come out with a lag of a month or so. So we're still kind of holding our breath. And if consumers and businesses start freaking out a little bit about uncertainty and pull back on their spending, or pull back on their investment, you can get some downturns. When there are moments of a lot of dust in the air, like what we saw a bit in April, you can go into some of this paralysis, but it still takes some time for that to show up in the numbers.”

   

• Q: How does the Fed kind of move? You know when, when policies aren't settled and there's uncertainty still.
• Goolsbee: Goes back to data dog analogy; now is the time for sniffing for information. “Now we've got a bunch of noise that we're trying to figure out the through line, but if we can get past that, I feel like underneath there, that solid, hard data economy is still there.”

• Q:  Is it fair to say that if the American economy were a car, that even though the outside of the car may be looking a little scratched up under the hood the engine, everything looks okay?
• Goolsbee: Maybe, I guess so. It's important to remember that the Fed’s job is to be the steady hand, not respond to the daily gyrations either of the stock market or of policy pronouncements. And we've continued to get these numbers that at least suggest that it's going okay. It's just, I think, not realistic to expect businesses or central banks to be jumping to conclusions about long term things when you've got so much short term variability. It's just a very difficult environment.

• Q: What do you think the American people should kind of glean from these numbers, from what we've seen with inflation, is it something to be happy about, or do we still need to wait and see?
• Goolsbee: A little bit of both. You never want to make too much of any one month or even two months numbers, what I hear walking around, talking to folks, is lack of consistency, that if they can't count on what's happening, then they just can't act yet. They just got to sit on their hands. But the official data only come out with a lag. That's why it's at moments of transition extra important to get out and listen to the people in real time what they're seeing.