Chicago Fed President Austan Goolsby expressed concern about the risks of keeping interest rates high for an extended period of time in an interview with Marketplace overnight. Mr. Goldsby emphasized the importance of adjusting the level of monetary policy restrictions as the economy moves closer to its inflation target.
He likened this to cooking a turkey: Just as a turkey needs to be removed from the oven before it’s fully roasted to account for “residual heat,” monetary policy also has to avoid overshooting inflation before it reaches its target. He suggested that it should be relaxed to prevent this.
“Once we are confident that inflation is on track to reach our target, the amount of restrictions we need to apply should be reduced,” Goolsby said.
Additionally, Mr. Goolsby highlighted progress in reducing inflation, particularly outside the food sector. He pointed out that inflation is on a downward trend, and although it has not yet reached its target level, it is on track to see the largest decline in inflation in 71 years in 2023.