Chicago Fed President Austan Goolsbee expressed confidence that the inflation trend is on a “golden path,” characterized by a stable decline without triggering a recession. However, he refrained from explicitly stating his intentions regarding possible future interest rate cuts by the Federal Reserve.

Investors, instead, are getting increasingly convinced of a September rate cut, with odds near 100%, according to the CME Fed Watch Tool.

Golden Path, But No Pre-Commitments

In an interview with Yahoo Finance on Thursday, Goolsbee highlighted, “We’ve had multiple months in a row of improvement,” and noted the inflation surprise at the beginning of the year appeared to be just “a bump on the road.”

He stressed that inflation has significantly decreased over the past 12 to 18 months, describing it as one of the fastest declines in U.S. history, achieved without causing a recession. This unprecedented scenario, he said, represented the “golden path.”

Goolsbee also highlighted the anticipated declines in housing inflation and improvements in the services sector. He emphasized the consistent month-to-month improvements in various components of inflation are indicative of progress toward the 2% target.

Regarding labor market conditions, Goolsbee acknowledged some “warning lights” but stated the situation does not currently resemble a recession, rather a cooling back to better balance. He reiterated that the job market hasn’t shown signs of traditional overheating.

When asked about the potential for a rate cut, Goolsbee expressed his reluctance to make premature commitments, preferring to await more data and the views of other Federal Open Market Committee (FOMC) members.

“I don’t like tying our hands ahead of time,” he said. He emphasized the importance of flexibility, stating he would not commit to a specific timeline for rate cuts at this time.

Market Reactions: Stocks Decline

Both the dollar and Treasury yields remained relatively unchanged during Goolsbee’s remarks. The U.S. dollar index maintained its session gains, with the Invesco DB USD Index Bullish Fund ETF up 0.28%. Treasury yields saw only marginal increases on the long end.

The U.S. stock market experienced a decline after 10:30 a.m. ET, with all major indices flipping to losses. The Russell 2000 also erased its session gains.

Both the SPDR S&P 500 ETF Trust ( SPY ) and the tech-heavy Invesco QQQ Trust were down 0.1%.

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