Fed’s Goolsbee says mild US recession possible

April 14 (Reuters) – A U.S. recession is certainly possible as the Federal Reserve’s steep interest rate hikes over the past year filter fully through the economy, Chicago Fed President Austan Goolsbee said on Friday, as he again urged the central bank to be cautious about policy.

“There̵[ads1]7;s no way you can look at current conditions around the world and in the United States and not think that a mild recession is definitely on the table as a possibility,” Goolsbee said in an interview with CNBC.

He was responding to a question about a forecast by Fed staff that stress in the banking sector would tip the economy into recession later this year. “The data shows that, and we’ve raised rates by almost 500 basis points in a year,” he added.

The economy has begun to show signs of faltering due to higher interest rates as inflationary pressures, by some measures, also continue to slowly ease. The Commerce Department reported Friday that retail sales fell more than expected in March.

The US Federal Reserve raised its benchmark interest rate by 25 basis points to a range of 4.75% – 5.00% at its March meeting as it approaches a peak in interest rates.

Most Fed policymakers since then have continued to stress the need to focus on bringing inflation back to the central bank’s 2% target, with the exception of Goolsbee and San Francisco Fed President Mary Daly.

On Friday, Fed Governor Christopher Waller weighed in on the prospect of another quarter-percentage-point hike on March 2-3. in May when he said the central bank’s lack of progress in bringing down inflation meant that interest rates would have to rise.

Atlanta Fed President Raphael Bostic told Reuters in an interview, also on Friday, that the Fed could “hit the target and hold” with one more rate hike.

Goolsbee said incoming economic data ahead of the May meeting will inform his view on whether the Fed should raise interest rates again, particularly the extent of tightening in credit conditions following the collapse of two US regional banks last month, although he sounded cautious.

“We still have several weeks before the FOMC meeting, so I don’t want to specify at the outset what that’s going to mean for what I’m going to be in favor of, but let’s just be aware that we’ve covered a lot,” Goolsbee said . “It takes time for it to work its way through the system… let’s not be too aggressive.”

Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama

Our standards: Thomson Reuters Trust Principles.

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