On Monday (May 24th) local time, Austan Goolsbee, the President of the Chicago Fed, said he expects further cooling in US inflation, paving the way for the Federal Reserve to begin cutting interest rates earlier.

In an interview with the media, Goolsbee said he was "very optimistic" that inflation would soon improve, giving the central bank more confidence.

Although Goolsbee did not reveal any information about the timing of the rate cut, he mentioned whether it was appropriate for policy makers to consider keeping short-term interest rate targets at the current high level.

Two weeks ago, the Fed announced that the federal funds rate target range would be maintained between 5.25% and 5.5%, marking the seventh consecutive meeting since September last year that the bank has maintained the interest rate.

At the same time, the economic outlook expectation released showed that the median forecast of the FOMC on the federal funds rate target range at the end of this year was between 5% and 5.25%, which supports the net interest rate cut of 25 basis points this year, significantly shrinking from the 75 basis points in the March meeting.

It is worth mentioning that the number of people on the dot chart who support “no rate cut” has increased from 2 to 4. Goolsbee believes that the economy has shown new signs of pressure, and it is necessary for the central bank to consider whether its interest rates need to be as high as they are now after internal discussion.

Goolsbee pointed out that the inflation-adjusted monetary policy interest rate is at the highest level in decades, putting downward pressure on the economy.

He said that there have been "several warning signals" in the economy—consumer spending seems to be cooling down, the number of recent unemployment benefit applicants has increased, and the delinquency rate for consumer credit card debt has clearly soared.

"If there are several good inflation data reports like the May CPI report and the economic situation continues to slow down," you have to start questioning whether we should continue to take the same restrictive measures," Goolsbee said.

He said that the central bank raised the benchmark interest rate to the current level to prevent the risk of overheating the economy, and recent signs of economic weakness indicate that the economy has not overheated, "what level of restriction should be, this is a question worthy of our consideration."

Goolsbee is widely regarded as one of the most "dovish" officials within the Fed. Many of his colleagues have previously stated that although the drop in other inflation data, including CPI, is encouraging, they still need to see months of inflation progress before deciding to lower interest rates.

Gennadiy Goldberg, Chief US Interest Rate Strategist at TD Securities, pointed out that this Friday's release of the Personal Consumption Expenditure (PCE) Price Index may be the main event that the market will focus on, as it is the most favored inflation indicator for the Fed in the long run.

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