Chicago Federal Reserve President Austan Goolsbee described the latest inflation data as "borderline disturbing," signaling growing concerns within the central bank about persistent price increases. Speaking to PBS NewsHour, Goolsbee emphasized that the consumer price index (CPI) rose 0.4% in October, surpassing economists' expectations and marking the third consecutive month of elevated inflation. He noted that factors like tariffs have not eased as hoped, and the sustained high inflation in services is particularly worrisome.
The comments come as the Federal Reserve weighs its next interest-rate move, with some officials suggesting more aggressive action may be necessary. Fed Governor Christopher Waller hinted at a potential half-point rate hike in December if core CPI remains around 0.3%, while Dallas Fed President Lorie Logan advocated for two additional quarter-point increases. The Fed had previously raised rates to a range of 3.75%-4% in September before pausing in October.
Goolsbee expressed concern about the possibility of consumers and businesses beginning to expect high inflation, which could complicate efforts to cool price growth. However, he stopped short of endorsing a specific rate hike at the December meeting, preferring to keep options open. Waller, Logan, and Michelle Bowman are voting members of the Federal Open Market Committee (FOMC) this year, while Goolsbee will join as a voting member next year.
Following the inflation report and remarks from Fed officials, market expectations have shifted decisively toward a rate hike in December. Fed funds futures now indicate a 15% chance of a half-point increase, with a 60% likelihood of rates reaching 4.25%-4.5% by January. The central bank's challenge will be balancing the need to rein in inflation without stifling economic growth.