April 19 (Reuters) - Progress on bringing down inflation has "stalled" this year, Chicago Federal Reserve President Austan Goolsbee said on Friday, becoming the latest U.S. central banker to drop an earlier focus on the coming need for interest rate cuts.
"Given the strength of the labor market and progress on easing inflation seen over a longer arc, I believe the Fed's current restrictive monetary policy is appropriate," Goolsbee said during an appearance before a business journalism group in Chicago. "I think we have to recalibrate and we have to wait and see."
The belief that rates will need to stay high for longer to get price pressures moving down again is now the dominant view at the Fed. The U.S. central bank has kept its policy rate in the 5.25%-5.50% range since last July, and just a few weeks ago most policymakers, including Goolsbee, thought at least three rate cuts this year would be appropriate.
Three months of higher-than-expected inflation data "can't be dismissed," and the Fed will need to determine if continued strong growth in the economy and job market is a sign of overheating, Goolsbee said.
Though higher productivity and labor force participation, driven partly by immigration, suggest there is "space for progress" on services inflation, he said, persistently high housing inflation remains the main threat to price stability.
"It is supposed to have been falling," he said, citing the decline in market data on new leases. "If it doesn't, it will be hard to see a smooth path back to our 2% inflation goal."
Goolsbee notably did not rule out a fresh rate hike in the face of disappointingly sticky inflation, but he also said the Fed may need to reduce borrowing costs if inflation resumes its decline.
"We're just trying to figure out ... what is necessary, how restrictive do we need to be ... we have weeks, months to find out," he said.
"Ultimately the proper policy going forward will depend on the data."
Economists and traders now expect the Fed will hold rates steady at its next three policy meetings, with a rate cut coming at the Sept. 17-18 session. Financial market bets against any more than one reduction in borrowing costs this year also have risen.
Reporting by Ann Saphir; Editing by Paul Simao
