Fed’s Goolsbee: Unless conditions change, I feel good about 12-18 month path to neutral

• We for sure should watch long rates
• Fed has to figure out why 10-year is rising and keep an eye on long rates
• This 12-18 month timeline is very interesting as it sounds like a much slower process.
• I don’t think we’re at neutral now
• Core PCE is still too high
• If there is disagreement over the neutral rate, it does make sense to start slowing the pace of rate cuts
• The basic story of the economy remains falling inflation, labor market cooling to full employment
• Do not think rates will go back to where they were before the pandemic

This line about 12-18 months suggests moving slowing and I would put it down as more evidence that a December cut is less likely. Market pricing right now is 59% for a cut, that’s come down significantly this week (from 85% Monday) in large part due to Powell yesterday.

This article was written by Adam Button at www.forexlive.com.