Cautious Fed messaging kept mortgage markets guessing on how soon relief might come
Chicago Federal Reserve president Austan Goolsbee used back‑to‑back appearances in Washington this week to argue that it was too early for the United States central bank to push ahead with aggressive rate cuts.
With inflation hovering around 3% on the Fed’s preferred personal consumption expenditures measure, Goolsbee warned that policymakers risk repeating their early‑pandemic mistake of assuming price pressures would fade on their own.
He said inflation “is not good enough – and it’s not what we promised when the Federal Reserve committed to the 2% target. Stalling out at 3% is not a safe place to be for a myriad of reasons we know all too well.”
Speaking to the National Association for Business Economics in Washington, Goolsbee said, “I feel that front‑loading too many rate cuts is not prudent in that circumstance.”
“People express that prices are one of their most pressing concerns. Let’s pay attention,” he said. “Before we cut rates more to stimulate the economy, let’s be sure inflation is heading back to 2%.”
Housing inflation and mortgage rate pressure
Goolsbee pointed specifically to stubborn housing‑related inflation, noting it is not being driven by tariffs and required vigilance from the Fed. That stuck a nerve for mortgage lenders who have watched borrowing costs ease from their 2023 peaks but remain elevated by pre‑pandemic standards.
Average 30‑year mortgage rates recently fell to just above 6%, their lowest level in more than a year, according to Freddie Mac data, but remains far from the ultra‑low levels that fueled the refinancing boom earlier in the decade.
Originators previously said there's “too much noise” around rate forecasts and warned that high borrowing costs and constrained inventory continue to sideline buyers despite modest rate declines.
Debating productivity, tariffs and the path to cuts
Goolsbee also pushed back on arguments that expected productivity gains, including from artificial intelligence, are enough reason to ease policy now.
“You want to be extremely careful… You can overheat the economy easily if policy is based on expectations about the impact of investments that do not produce results as grand as what was forecast,” he said.
“Then you have a big overhang and you just go into a regular downturn.”
On tariffs, Goolsbee acknowledged that recent court rulings striking down portions of the previous administration’s duties could bring “relief to the inflation side,” even as they add to business uncertainty.
He said he remains “optimistic that there can be more rate cuts this year,” but stressed that depends on “seeing actual progress on inflation that shows we are on a path back to 2%.”
Meanwhile, Federal Reserve governor Christopher Waller framed the next policy move as a close call, telling business economists that whether the central bank cut rates again in March depends squarely on whether January’s upbeat jobs data proved to be “signal or noise” for a labor market he described as fragile.
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