Fed’s Goolsbee says policy uncertainty led to his shift on rate-cut path

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(Reuters) – Chicago Federal Reserve President Austan Goolsbee said on Friday he now projects a shallower rate-cutting path in 2025 than he had previously, but added he still believes the U.S. central bank’s policy rate will fall a “judicious amount” next year.

“The uncertainty about policy makes it particularly hard to make estimates of what the neutral rate is and what the inflation rate is in particular,” Goolsbee told CNBC. “And so that’s part of why I’m a little shallower” on the rate path for 2025. He said, however, that inflation still looks like it is headed to the Fed’s 2% target.

With the policy rate well above its eventual stopping point of around 3%, Goolsbee said, dropping inflation means the Fed will need to bring it down “a fair bit” over the next 12 to 18 months.

Goolsbee had previously indicated he felt rates would need to fall by 100 basis points next year, in line with the previous view of his fellow policymakers. Projections released this week after the Fed cut its policy rate by a quarter of a percentage point to the 4.25%-4.50% range show most U.S. central bankers see just 50 basis points of cuts next year.

(Reporting by Ann Saphir; Editing by Paul Simao)