Chicago President Fed Goolsbee thinks that the central bank should wait a few months before reducing interest rates

What does a donut tell us about the state of the economy?

The president of the Chicago Federal Reserve, Austan Goolsbee, thought of this Wednesday while visiting Mel-O-Cream donuts in Springfield, Illinois.

Even inside a donut store, the effects of the prices on the economy can be seen. “It’s a bit surprising, because the donuts seem to be a very local product, and yet they get ingredients like palm oil that come from Indonesia,” said Goolsbee. The Trump administration has established prices on Indonesia at 19%.

“They must now determine what the rate rates are, and the prices have increased a large amount. If this happens, this could have an impact of several thousand dollars on their operation,” he continued. But, he added: “I hope it is not a sign of something more extensive or wider in the way in which inflation is cvid … generated his own snowball, in which he was supposed to disappear and that he did not disappear.”

This price will cost Chris Larson, co-owner of Mel-O-Cream, “around $ 4,000 per shipment per week,” he said. And it was somewhere “closer to $ 2,000 to $ 2,100 per week. Now it will drop to $ 4,200 … for exactly the same product. “

Goolsbee’s visit because it is one of the 12 people in the country who decide what to do with interest rates. The Fed rates fixing committee will then decide to cut or hold on September 17, and business prospects like Mel-O-Cream helped help determine its next vote.

Larson’s hope? That the Fed will reduce interest rates, which would help Mel-O-Cream finance new equipment to reduce labor costs and pile up the impact of prices.

“What is the cost of money to develop, update, update?” What do these things look like? ” Said Larson. “These things concern us, and we would be delighted to see, as everyone would do, interest rates would drop.”

Goolsbee said he was not yet ready to attach his hands to a drop in the interest rate in September.

“Let’s come on a few months of data before drawing conclusions. The most difficult thing that the Fed has ever to do is to carry out the timing at times of transition,” he said on the podcast on Wednesday “Here is the SCOOP” of NBC News. “I think that as we spend this fall, September, November, December, all these living moments that we could reduce rates.”

Government data on Thursday showed that The prices paid by American companies have increased much more than expected. Another measure, the consumer price index, showed Tuesday that inflation remained stubbornly high in July.

The objective of inflation of the Fed is 2%, lower than reading the most recent consumers of 2.7%and a reading of producers’ inflation of 3.3%. Even with these figures, the market still plans a reduction next month.

The radical prices of President Donald Trump on hundreds of business partners around the world could affect the cost of most imports that companies buy abroad. With a rate of rates of up to 50%, companies can be faced with a new maze of tariffs and price invoices, as well as the uncertainty that comes with booming and out of sight price deployment.

“The Fed, by law, is supposed to maximize employment and stabilize prices. It is therefore inflation and employment which are really the twin rounds of the way we think of the development of rates,” said Goolsbee, stressing the role of the federal reserve in the wider economy.

“There are parts of the labor market where there are still essentially work shortages. It is very difficult for people to find workers. And this is what you saw here at the donut factory,” he said.

Goolsbee oversees the seventh district of the federal reserve, which includes Iowa, a large part of Illinois, Indiana, Michigan and Wisconsin.

Some of his colleagues, including Jeffrey Schmid, from the Fed of Kansas City; Alberto Musalem, from the Fed of Saint-Louis; And Beth Hammack, from the Fed of Cleveland, sound just as cautious about the economy. The three current voters of the Federal Open Market Committee have declared in recent days that it was too early to decide or that the maintenance of stable rates for the moment would be their preference.

The long -term market provides that the Fed will reduce 0.25% at its next meeting. But some, Including the secretary of the Treasury Scott BessentThink that the Fed should make a more dramatic cut, up to half a point.

Musalem declared on Wednesday on CNBC that a reduction in this great would be “not supported by the current state of the economy”.

In the midst of relentless attacks of Trump and his administration against the FOMC and President Jerome Powell, Goolsbee, who was an economic adviser from President Barack Obama, said that economic indicators should stimulate the development of monetary policies, not politics.

“The FOMC and my own thought are that what should stimulate interest rates decisions should be economic conditions and economic prospects,” he said. “I invite anyone to watch the minutes or to read the transcriptions of the FOMC – the people of this body take very seriously that it is the economy that should conduct decisions. And that’s what motivates decisions. ”

“This is a committee made up of people in many different perspectives. And as I say, they keep a trace, word for word, what everyone says during meetings. And you can watch it yourself. “