news

Cailianshe News, August 5 (Editor: Niu Zhanlin)Chicago Fed President Goolsbee said on Monday the Fed will respond to signs of economic weakness and suggested current interest rates may be too tight.

Asked whether weakness in the job market and manufacturing would prompt a response from the Fed, Goolsbee did not commit to a specific course of action but said it made no sense to maintain a "restrictive" policy stance if the economy was weakening.

Goolsbee emphasized: "In fact, the Fed's responsibilities are very clear, which is to maximize employment, stabilize prices and maintain financial stability. This is what we are going to do." He added that the Fed will act in a forward-looking manner, and if overall conditions begin to deteriorate and affect any aspect of employment, price stability or financial stability, they will take measures to repair it.

When he was interviewed, the global market was hit by Black Monday, and the U.S. stock market was no exception. The three major U.S. stock indexes fell sharply at the opening, with the S&P 500 index falling 4.2% and the Nasdaq falling 6%. Star technology stocks fell sharply,NvidiaThe stock price fell 13% and fell below the $100 mark.

The Fed kept its policy rate unchanged last week, with Chairman Jerome Powell saying he needed more data to justify a rate cut.

But Friday’s jobs report revealed weakness on several fronts: July’s 114,000 jobs added were weaker than expected, and job gains in earlier months were revised down.

Adding to concerns, the unemployment rate climbed to 4.3%, triggering the "Sam's rule," which indicates the U.S. economy has already fallen into recession. Sam's rule states that a recession is likely to begin when the three-month moving average of the U.S. unemployment rate rises more than 0.5 percentage points from its lowest point in the past 12 months.

There are growing concerns that the Fed's actions may be lagging behind, which is also one of the main reasons for the plunge in global markets. Many investors expect that as long as the Fed takes action, everything will be fine.

However, Goolsbee reiterated that the Fed's job is not to react to a month of weak labor data. "The employment data was weaker than expected, but it doesn't look like a recession yet. When making decisions, we should be forward-looking and consider the future direction of the economy, not just based on current data."

Goolsbee stressed that the monthly employment data has a margin of error of 100,000, so don't jump to conclusions. When asked about the emergency rate cut called for by the market, Goolsbee said that options including rate hikes and rate cuts have always been on the table, and if the economy deteriorates, the Fed will take measures to repair it.

He added that in discussing whether the policy should be less restrictive, there would be no pre-emptive restrictions on future measures, as the Fed still needs to obtain more information to make decisions. However, if the economy is not overheating, then tightening or restrictive measures should not be continued.

Christian Subbe, chief investment officer at HQ Trust, said the Fed is not expected to cut interest rates before its September meeting, but officials' comments could become more dovish and help calm the market. He said weak data does not necessarily indicate a hard landing for the economy, and the Fed has plenty of room to cut rates further if necessary.

Wharton School professor Jeremey Siegel believes that the Fed should cut interest rates by 75 basis points now and then cut interest rates by another 75 basis points at the September meeting. Siegel predicts that if the Fed does not cut interest rates before the September meeting, the market will react severely.

(Niu Zhanlin, Cailianshe)