FED: Chicago's Goolsbee Comfortable With Inflation; Neutral Is "Fair Bit" Lower

Chicago Fed President Goolsbee, the biggest dove on the FOMC, tells CNBC that he remains comfortable that inflation is on a path to 2%. But despite reiterating his view that the neutral level of rates is "still a fair bit below where we are today", he stops short of pushing for rate cuts in H1 this year, saying that he doesn't like "tying our hands down" ahead of crucial data in the next few months. 

• On the December PCE inflation data: "I'm liking this PCE number. It was expected, and it was even a little better than expected. I don't make too much of any one month, but you know, I've been saying that I felt like we are on path to 2%. I have comfort, I won't say, over confidence, but I have comfort that we're on that path...if we keep getting [inflation] numbers like what we just saw, the 12 month number is going to start plunging dramatically as we go into this first quarter...that's just a how the thing is added up for 12 months."
• On Trump policy risks: "I'm not weighing in on on what fiscal policy the Congress and the President are going to choose to make. We just our signal is getting a little muddied when things are happening that are driving up prices now, on a purely theoretical basis, if it were a one time increase in tariffs that increased cost, but there was no retaliation, and it wasn't lasting, that's supposed to, in theory, be a transitory increase in the inflation rate. And so it's not obvious that monetary policy should react to it, but the difficulty we're going to have here in this near period is if collectively policy is going to be raising prices, we're going to have to figure out which part of the inflation is the part that monetary policy should look through, and which part is a sign of the economy, but as I say, separate from that, just the underlying part of the economy to me looks like it's on an excellent path."
• On slowing the pace of rate cuts: "I have no problem slowing our pace of cutting, feeling our way to where neutral is. As we get closer to neutral, we already cut 100 basis points, I think is a is a good start, and now we're closer. So I believe the words that that Chair Powell used where we weren't in a we weren't in a rush to get to get it to neutral. And I understand and I kind of agree with that sentiment.... the broad math is still [that neutral] is still a fair bit below where we are today...if you feel like we're continuing on this path of inflation coming down to 2%, then, that to me, that opens a door for rates to be a fair bit lower than they are today."
• Goolsbee doesn't sound like he's pushing for a cut at the next meeting - he's pretty waffly when asked about the prospects of the next rate cut being in March or June: "I don't like tying our hands when we got a lot of important data still coming through [including 2x CPI and jobs reports, and seasonality issues in the Q1 data]...there's not total consensus on exactly where neutral is, so as we're getting closer with the rates, I do think it makes sense to kind of slow down, there's a lag to monetary policy...we don't want to re overheat and we don't want to slow down. And there's a question mark that's coming from this, from the policy uncertainties...we do have to work these through before we can express confidence on where we are on the underlying economy."