The Fed’s Goolsby says a “golden path” to a significant decline in inflation without a recession is still possible

Chicago Fed President Austan Goolsbee said Tuesday that a soft landing remains on the table as the central bank seeks to combat inflation without significantly damaging the economy.

“Because of some of the strangeness of this moment, there is a possibility for a golden path…that we get inflation down without recession,” Goolsby said on CNBC’s “Squawk Box.” “If that happens… it will just be a continuation of what we’ve already seen this year, which is unemployment has risen very modestly, while inflation has come down a lot. … That’s our goal.”

The Federal Reserve held interest rates steady last week, the second straight meeting the Federal Open Market Committee has chosen to hold, after a series of 11 rate hikes.

Core inflation, as measured by the Personal Consumption Expenditures Price Index, is currently 3.7% on an annual basis, which is still well above the Federal Reserve’s 2% annual target. Goolsby stressed that the reduction in price pressures so far was indeed a great achievement.

“The fastest decline in inflation in any year was 1982,” Goolsby said. “We’ll see what happens over the next couple of months. We may equal the fastest decline in inflation in the last century. So we are making progress on the inflation rate.”

The economy has held up well so far amid tightening measures over the past year and a half. GDP expanded at an annual rate of 4.9% in the third quarter, even stronger than high expectations.

Goolsby stressed that achieving such a “golden path” in the face of the historic rise in inflation will not be an easy task.

“Unusually for a soft landing of this size, there has never been a reduction in the inflation rate, to bring inflation down as much as we are reducing it without a major recession. That has never happened,” he said. “Let’s shoot to try to manage that.”

The Fed chairman said the central bank would rely on data going forward, echoing Chairman Jerome Powell’s comments last week.

Powell said earlier that the central bank had not yet made any decisions regarding its meeting in December, saying that “the committee will always do what it believes is appropriate at that time.”