Chicago Fed President Austan Goolsbee said Monday that three rate cuts in 2024 are "in line with my thinking," and that the fundamental story about falling inflation has not changed despite hotter-than-expected readings in January and February.

"It seems hard for me to view that the seven months previous to the start of this year were just random," Goolsbee told Yahoo Finance Live in an exclusive interview.

"We're in an uncertain state, but it doesn't feel to me like we've changed fundamentally the story that we're getting back to target."

Goolsbee’s comments echoed those of Fed Chair Jay Powell last week after the Fed held interest rates steady and maintained projections for three rate cuts this year. Officials also raised their outlook for inflation and economic growth.

The decision to stay the course for three rate cuts this year — the same number of cuts forecast in December — comes after sticky inflation data was thought to push officials to scale back the number of cuts for 2024.

Core consumer prices based on the Consumer Price Index showed an annual increase of 3.8% in February after rising 3.9% in January. These readings, while down from levels closer to 5.5% last year, are nearly double the Fed's 2% inflation target.

But the Fed's preferred inflation gauge, the core Personal Consumption Expenditures index, has shown better progress on the inflation front, rising 2.8% in January after a 2.9% rise in December.

For Goolsbee, the main puzzle as to why inflation hasn’t come back down fully has to do with housing. He thinks progress has been made on rents, but that’s yet to reveal itself in the overall data.

"We've got to get housing inflation coming down closer to where it was before the pandemic," he said.

Markets are still betting that the central bank will initiate its first rate cut in June, but Goolsbee wouldn’t commit to that timetable.

When asked if a June rate cut is still on the table, he said, "Everything is always on the table or off the table."

At last week's meeting of the Fed's Federal Open Market Committee, nine officials who offered new forecasts saw the central bank needing to cut rates three times this year; five officials believed that two cuts would be needed.

Goolsbee said on Monday that the median estimate of three cuts was "in line with my thinking this time."

Not all Fed officials share the same view when it comes to the number of rate cuts this year.

Atlanta Fed President Raphael Bostic said Friday that he now expects only one rate cut this year and thinks that cut will happen later in the year than previously expected, underscoring that the Fed can afford to be patient as long as the economy holds up.

Another Fed official, governor Lisa Cook, said in a Monday speech at Harvard University that the Fed is not in a rush to lower rates, saying that "fully restoring price stability may take a cautious approach to easing monetary policy over time."

"The path of disinflation, as expected, has been bumpy and uneven, but a careful approach to further policy adjustments can ensure that inflation will return sustainably to 2 percent while striving to maintain the strong labor market."

The other side of the Fed's mandate

Goolsbee said Fed officials now need to strike the balance of both sides of the central bank’s dual mandate: stable prices and employment. Up until now, cooling inflation was a bigger focus.

"I think with that level of restrictiveness, you will have to start paying attention to the other side of the mandate too if it goes on, and you saw Chair Powell discuss the employment side of the mandate at the press conference as well," he said.

When it comes to the strength of the job market and the consumer, Goolsbee categorized consumer spending as "mixed" and noted the question of continued strength has been colored by higher immigration over the past year following the pandemic.

He believes higher immigration will support higher consumer spending and economic growth.

"It's mixed our picture a little...how much consumer spending and what payroll jobs numbers we can sustain for a given rate of inflation has been mixed a little by the recalculation about immigration," he said.

"There's no question about it is going to lead to more aggregate GDP is going to lead to more aggregate consumption."

Goolsbee also said he is on board with a plan to slow the shrinking of the Fed’s balance sheet, a lesser-known policy tool it has been using to tighten financial conditions.

The FOMC did not make a final decision last week while meeting in Washington, D.C., but Powell said he expects it will be appropriate to start that slowdown "fairly soon."

"I think we want to get on a regularized path doing it a little slower as we get closer to the point at which the reserves are ample," said Goolsbee.

He views slowing the balance sheet runoff on a separate track than cutting rates. Asked whether rates would be cut before slowing shrinking the balance sheet, he said "it depends."

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