Federal Reserve's Goolsbee: Don't Race to Cut Rates Due to Productivity Growth

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ME News, May 7 (UTC+8). Chicago Federal Reserve Chair Goolsbee warned that people should not instinctively cut interest rates due to accelerating productivity growth, because this phenomenon can sometimes drive inflation higher. In a pre-prepared speech released ahead of a panel discussion at the Milken Institute Global Conference on Wednesday local time, Goolsbee said the Fed’s response to faster productivity growth “largely depends on whether the productivity increase is unexpected or expected to occur in the future.” He said that in the first scenario, inflation may be suppressed, allowing rate cuts. In the latter scenario, additional investment and spending driven by productivity growth could push inflation up, which would require raising interest rates. He also emphasized the need to watch out for consumption and investment driven by future growth expectations. “The stronger the hype, the greater the demand for rate hikes to prevent overheating,” he said. (Source: Jin10)

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