Chicago Federal Reserve President Austan Goolsbee stated that inflation remains too high and is trending in the wrong direction, despite some recent improvements in services inflation. Goolsbee's comments were made during a live CNBC interview from the Cboe trading floor, where he highlighted that the inflation side of the Fed's dual mandate is currently the primary concern, rather than the job market side [1].
Goolsbee's remarks followed the Commerce Department's report that core inflation, as measured by the Fed's preferred personal consumption expenditures (PCE) price index, reached 3.4% in May, marking its highest level since October 2023. Price increases were broadly distributed, with goods rising 0.4% and services up 0.5%, the largest increase since January. Notably, energy prices surged 6.5%, and transportation services, which are sensitive to gas prices, accelerated by 0.8% [1].
While markets anticipate the possibility of a Fed rate hike in September, Goolsbee refrained from speculating on future interest rate moves. He expressed support for new Fed Chairman Kevin Warsh's approach to reducing forward guidance in Fed communications, noting that the recent Federal Open Market Committee (FOMC) statement was significantly shorter and omitted forward guidance language. Goolsbee described this as a healthy reset and applauded Warsh's efforts to discourage speculation about the rate path [1].
Goolsbee also addressed the internal dynamics at the Fed, dispelling any notion of discord following Warsh's appointment. He characterized Warsh as a 'serious guy' with a different communication style and emphasized their longstanding professional relationship. The next FOMC meeting is scheduled for July 28-29, with markets pricing in about a 30% chance of a rate hike, according to CME Group's FedWatch. Goolsbee is not a voting member of the FOMC this year but will have a vote in 2027 [1].
CONCLUSION
Chicago Fed President Goolsbee's comments underscore persistent inflation concerns and support for Chairman Warsh's move away from forward guidance. While markets are watching for potential rate hikes, Goolsbee and the Fed leadership are emphasizing caution and a streamlined communication approach.