Chicago Fed’s Austan Goolsbee: 3 Key interview takeaways

Yahoo Finance's Jennifer Schonberger sat down with Chicago Fed President Austan Goolsbee to discuss the most recent Fed decision, Fed Chairman Jerome Powell's press conference and what Goolsbee sees for the economy in the months ahead. Here are three main points from the discussion.

#1: Inflation readings are 'murky'

Goolsbee said that recent key CPI and core PCE readings "remained higher than we want them to be" in February, but have recently come down. While promising, these readings, for Goolsbee, indicate "we're in a little bit of a murky period" in regards to CPI and core PCE data.

#2: Three rate cuts 'in line' with his thinking

Schonberger asked Goolsbee if the Fed's decision to pencil in three rate cuts by the median this year was in line with his thinking, which Goolsbee confirmed, "the summary of economic projections is not forward guidance...we don't...deliberate on these future meetings."

#3: Breaking down 'the Taylor Rule'

Goolsbee defines the Taylor Rule, a formula where "you plug in the inflation rate, you plug in the unemployment rate...it spits out, 'Here, in the past, is how the Fed has behaved.'" While a useful tool, Goolsbee warns against "being too mechanically tied to 'let's just do whatever the formula says'" in regards to the Fed's decision-making.

Click here to watch the full interview with Chicago Fed President Austan Goolsbee.

Video Transcript

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AUSTAN GOOLSBEE: I think the big CPI and PCE inflation readings of January remained higher than we wanted them to be and higher than expected in February, but they did come down. They follow on seven straight months of really quite good CPI and PCE readings. So we're in a little bit of a murky period.

- Three rate cuts have been penciled in by the median for this year, is that in line with your thinking?

AUSTAN GOOLSBEE: And that was in line with my thinking this time for this. As you know, the summary of economic projections is not forward guidance, is not debated. We don't vote, discuss deliberate on these future meetings. The Taylor rule is a formula and says, you plug-in the inflation rate, you plug-in the unemployment rate, and it spits out here. In the past is how the Fed's has behaved.

I'm a Luce subscriber to the Taylor rule. You just got to be a little careful with being too mechanically tied to let's just do whatever the formula says.

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