Chicago Federal Reserve President Austan Goolsbee delivered the most explicit endorsement of an imminent rate cut from any FOMC member to date, telling CBS's Face the Nation Sunday morning that a June reduction is "all but certain" provided the May payrolls report comes in below 220,000. The remarks were the most market-moving Fed communication of the spring and are likely to draw scrutiny from FOMC colleagues uncomfortable with explicit forward guidance.
The two-year Treasury yield, which had ended Friday at 3.61%, plunged 19 basis points in Sunday's electronic session to 3.42% — the lowest level since February 2025. The move steepened the 2s10s curve to +14 basis points from -3 basis points, finally exiting the inversion that has persisted since July 2022. Curve normalization is historically associated with the early stages of rate-cutting cycles, not the late-cycle environment that bears had argued was more likely.
PCE Data Provided the Cover
Goolsbee cited Friday's March PCE inflation report, which showed headline inflation cooling to 2.4% from 2.6% in February and core PCE falling to 2.5% from 2.7%. The supercore services component — closely watched as a measure of underlying inflation persistence — printed at its lowest year-on-year reading since November 2021, suggesting that the Iran-driven energy spike has not contaminated underlying price dynamics.
Goolsbee specifically called out the supercore reading as "the data point that should put any remaining doubt to rest" and added that he viewed the March reading as "consistent with inflation being on a sustainable path to 2%." The explicit declaration of victory on inflation contrasts with the more cautious language Chair Jerome Powell has used in recent communications.
Market Pricing Adjusts
Federal funds futures now imply a 96% probability of a 25 basis point cut at the June 18 FOMC meeting, up from 78% before Goolsbee's remarks. The market is pricing in a cumulative 87 basis points of easing through year-end and 162 basis points by the end of 2027, implying a terminal rate of approximately 2.85% — significantly below the 3.10% median estimate from the March Summary of Economic Projections.
Equity futures responded positively. S&P 500 e-minis traded up 0.7% Sunday afternoon to 5,792, while Nasdaq 100 futures climbed 1.0% to 20,485. Bond market beneficiaries also rallied, with the iShares 20+ Year Treasury Bond ETF (