Chicago Federal Reserve President Austan Goolsbee warned that recent inflation data was "bad news" for the central bank, signaling that any potential interest rate cuts need to be approached with caution. The comments reinforce a hawkish shift in tone from Fed officials, causing markets to slash the probability of a near-term rate reduction to just 3.9% for the upcoming June and July meetings. The Fed has held its policy rate steady in the 5.25% to 5.50% range since its last increase in July 2023.
"We have got to get some assurance that we are going back to the 2% inflation target," Goolsbee said in an interview with Fox News, referencing the Personal Consumption Expenditures (PCE) price index which rose at a 3.5% annual rate in March.
Goolsbee, who is not a voting member on rate policy this year, highlighted that the composition of the current inflation "doesn't look good." He pointed to rising inflation even within service industries, which are largely seen as insulated from the direct impact of geopolitical factors like rising oil prices or trade tariffs. This persistent services inflation complicates the Fed's path forward, as it suggests price pressures are more broad-based and entrenched in the domestic economy.
The sentiment reflects a growing divide within the Federal Open Market Committee. The Fed's last meeting concluded with an 8-4 vote to maintain the current rate, the most divided decision since 1992. The dissents were notably against language that indicated the Fed's next move was likely to be a rate cut, revealing deep uncertainty about the inflation outlook. This internal disagreement, highlighted by Goolsbee's latest remarks, suggests a higher bar for the committee to build consensus around easing monetary policy. Observers will closely watch the upcoming April CPI report and any further comments from Fed Chair Jerome Powell for clues on the future path of interest rates.
This article is for informational purposes only and does not constitute investment advice.
