Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Fed should not rely too much on market reaction to guide policy, Goolsbee says

Published 02/28/2023, 02:41 PM
Updated 02/28/2023, 02:51 PM
© Reuters. FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., on March 19, 2019. REUTERS/Leah Millis/File Photo

(Reuters) - The Federal Reserve must supplement traditional government data and readings from financial markets with real-time, on-the-ground observations of economic conditions if it is to make good policy, Chicago Fed President Austan Goolsbee said on Tuesday.

"This is especially true when things are as strange and up in the air as they have been through much of the pandemic times," Goolsbee said in the text of his first public remarks since taking over as head of the Fed regional bank on Dec. 1 from Charles Evans.

"It is a danger and a mistake for policymakers to rely too heavily on market reactions" like stock and bond market gyrations that "tell us which way the markets want the Fed to move," he said.

Financial markets increasingly are pricing in expectations that the U.S. central bank will raise its benchmark overnight interest rate in coming months to a 5.25%-5.50% range, from the current 4.50%-4.75% range, as it seeks to curb stubbornly high inflation. That's slightly higher than where Fed policymakers in December signaled they would need to take the policy rate.

Fed policymakers will provide updated projections on the rate path and economy at the end of their March 21-22 meeting.

© Reuters. FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., on March 19, 2019. REUTERS/Leah Millis/File Photo

Goolsbee was speaking to the Ivy Tech Community College in Goshen, Indiana. Earlier on Tuesday, he visited the operations of Indiana-based RV manufacturer Jayco.

Fed Chair Jerome Powell earlier this month said one of the U.S. central bank's most important resources is the "haul" of information on local economies and communities gleaned from regional Fed banks like the one that Goolsbee now heads.

Latest comments

Mr. Goolsbee is acknowleding what I've said before: that the Fed does what the market wants.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.