Federal Reserve official Austan Goolsbee, highlighting the impact of global geopolitical risks on monetary policy, said the Fed may begin cutting interest rates later than expected.
He warned that interest rate cuts could be delayed until 2027, especially if a war with Iran were to keep oil prices sustainably high.
In a statement Tuesday, Goolsby said high energy prices could slow the decline in inflation toward the Fed’s 2% target. In this scenario, he said, the Fed may have to wait longer before cutting interest rates.
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Speaking at the Semaphore Global Economic Conference, Goolsby reiterated his earlier forecast of several interest rate cuts between now and 2026. He stressed, however, that this forecast could be delayed if current conditions persist and inflation remains high. Goolsby said: “If we do not see a decline in inflation and it remains at high levels, the timetable for interest rate cuts could extend beyond 2026. Our main responsibility is to bring inflation back to the 2% level. »
Goolsby, who had previously taken a relatively optimistic outlook, including believing that inflation caused by the tariffs would be temporary, said that confidence had weakened in light of recent developments.
On the other hand, Goolsby also said that not all scenarios are negative. He said that if the oil price shock from the Middle East proved temporary and inflation resumed a downward trend, interest rate cuts could be back on the agenda. However, he noted that in some cases even interest rate increases could be considered.
*This does not constitute investment advice.
