MNI BRIEF: Fed's Goolsbee - No Inflation Data Warrants Caution

The Federal Reserve has little visibility on inflation without official government data and that warrants caution on interest rate cuts, Chicago Fed President Austan Goolsbee said Thursday. 

"When it's foggy, let's be a little careful and slow down," he said in a CNBC interview. "The official data being turned off is more problematic on the inflation side than on the labor side. Because if labor starts to go wrong, we're going to get observations that show that. But if inflation starts to go wrong, we're not really going to get observations that show that. That accentuates my caution of front-loading rate cuts and just assuming that the inflation that we've seen the last three months is going to go away." 

Private data sources offer more information on goods than services, said Goolsbee, who is a voter on this year's FOMC. Three-month services inflation was pushing 4% ahead of the shutdown, and "that's almost certainly not coming from tariffs," he said. "We hope that that was a blip, and for it to go dark right at that moment is uncomfortable." 

The unemployment rate in October likely remained little changed with a range of private data showing stable hiring and vacancies, Goolsbee said ahead of a second straight missed release of official job market data due to the government shutdown. The Chicago Fed's latest Unemployment Rate Nowcast shows 4.36% with a 40% probability that it's a tenth higher and a 20% probability that it's a tenth lower.  "It feels like mild cooling," Goolsbee said. "I tend to think there's a lot of stability." The beginnings of recessions are not historically "low hiring, low hiring" periods, he added. (See: MNI INTERVIEW: US BLS On Track To Miss Nov CPI Report -Beach)