Fed’s Goolsbee: Nice to get inflation number that is better than expected

• Nice to get inflation number that is better than expected
• There is more uncertainty noise
• Still on path to get to 2% inflation.
• Today stations recent ferment was a bump.
• Next 12 to 18 months, rates can go down a paramount.
• Employment is stable, want to keep it stable, to do so rates need to come down to something like neutral.
• Agree policy rate is still far from neutral rate
• The Fed is significantly less restrictive than we were
• The neutral rate is around 3%.
• Our goal is to get inflation down to 2% and incomes would rise faster than the prices
• Anything that will impact jobs and prices we try to process
• When the new administration is in, we will process what policy does for inflation and employment
• Uncertainty on policy as part of why I feel rate path next year is a bit more shallow.
• Rates will come down by a judicious amount next year
• Rate path will be determined by employment and prices
• We might be more dependent on data and the conditions and the economic outlook
• If look at the dot plot, what is the long run neutral rate is below the level today.
• The last 6-months of PCE inflation is very close to 2%
• Recent inflation has been higher than expected, for sure bumps can happen and policy uncertainty, but its clear inflation is heading toward 2%.

US stocks are now higher on the day with:

• Dow up 0.84%
• S&P up 0.70%
• NASDAQ index up 0.60%

The small-cap Russell 2000 is now up 1.06%.

Looking at the US debt market

• 2 year 4.293%, -2.6 basis points
• 5 year 4.362%, -6 1 basis points
• 10 year 4.516%, -5.4 basis points
• 30 year 4.710%, -3.2 basis points

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