Chicago Federal Reserve President Austan Goolsbee still sees a path for rate cuts this year, although the outcome will ultimately depend on how long the U.S.-Iran war lasts and whether inflation shows signs of easing to the 2% target.
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New trading tool for QQQ bulls“I remain fairly optimistic that by the end of ’26 rates could go down, but I wanted to see proof that we’re back on an inflation headed to 2%,” Goolsbee told CNBC in an interview. “This [war] definitely throws a wrench into the plans.”
Goolsbee Warns of Inflation Risk as Rate Cut Odds Collapse
Goolsbee added that inflation poses a greater risk to the U.S. economy than the unemployment rate, which has ranged between 4.4% and 4.6% over the past few months.
Rate cut odds have plummeted since the beginning of the war. By year-end, the odds of one 25 bps rate cut are at 11.7%, down from 19.1% a month ago, while the odds of two cuts are at 0.2%, down from 32.2%.