Feds Goolsbee: Fed will return inflation to target, and can do it without a recession

<p>Chicago Fed Pres. Richard Goolsbee is speaking and says:</p><ul><li>Holding to 'inevitability’ that job losses are needed to slow inflation risks a 'near-term policy error.’</li><li>Some analysis shows inflation reaching target soon, 'without further policy tightening’ and only a modest slowdown in growth.</li><li>Fed needs to be 'extra careful' of tying policy to historical relationships that may not hold up in the current economy.</li><li>Recent data, with inflation slowing without job losses, have run against past U.S. patterns.</li><li>Fed will return inflation to target, but has a chance to do something rare by accomplishing that without recession.</li><li>Evidence points to the outbreak of inflation in 2021 as largely supply-related; ignoring supply improvements is a recipe for overshooting.</li><li>Long-run inflation expectations are 'well-anchored,' can help lower inflation with 'less economic pain' than previously.</li><li>Importance of expectations and Fed credibility makes proposals to raise the inflation target from 2% 'quite risky.'</li><li>Risks to the outlook include oil prices, slowdown in China, possibility of a protracted U.S. auto strike, or a disruptive government shutdown.</li><li>Housing will be key to continued inflation progress in the next few quarters, with the risk that rising home prices could also boost market rents.</li><li>Better productivity could mean long-run potential is not as low as some have feared, allowing more growth without inflation.</li><li>Wages typically lag prices, so short-term movements should not be used to predict inflation.</li></ul><p>Goolsbee is a dove. He is a voting member currently. </p>

This article was written by Greg Michalowski at www.forexlive.com.