Chicago Fed President warns markets not to assume sustained productivity gains will justify early monetary easing.
Chicago Federal Reserve President Austan Goolsbee urged caution against assuming recent productivity growth will continue at its current pace, warning markets against pricing in early interest rate cuts. He emphasized that while productivity gains could ease inflation pressures, they remain uncertain and should not be front-run by policymakers or investors.
Productivity growth accelerated to a 2.9% annualized rate in Q2 2024, up from 1.2% in the prior quarter, but Goolsbee noted historical volatility in such data. The Fed has maintained its benchmark rate at 5.25%-5.50% since July 2023, with markets currently pricing in a 25-basis-point cut by December.
Investors have increasingly bet on a dovish pivot, but Goolsbee’s remarks suggest the Fed may adopt a wait-and-see approach until more evidence of sustained disinflation emerges.