Goolsbee Sounds Alarm on Inflation, Policymakers Divided on Rate Hikes

Chicago Federal Reserve President Austan Goolsbee has sounded the alarm on high inflation, calling it the biggest problem facing the US economy. Inflation remains above the Fed's 2% target, with June's Consumer Price Index (CPI) showing a month-on-month decrease of 0.4%, but an annual increase of 3.5%. Goolsbee emphasized that rising prices are more damaging than current labor-market conditions.

Goolsbee also discussed the employment market, describing it as 'stable without being good.' He pointed to the unemployment rate, hiring, and layoffs as key factors behind his assessment. The Chicago Fed Chair noted that market conditions have weakened but do not require immediate attention from the Federal Reserve.

Policymakers are divided over interest rate hikes, with some calling for a 25-basis point increase. Beth Hammack, Neel Kashkari, and Lorie Logan dissented in favor of a rate hike at the July FOMC meeting. Kashkari urged the Fed to raise rates due to high inflation and the ongoing US-Iran conflict, which has complicated the policy outlook.

The Federal Reserve is facing a difficult decision ahead of its September FOMC meeting. With stubborn inflation and volatile job data, markets are uncertain about whether the Fed will raise interest rates or leave them unchanged. The odds of a rate hike are almost equal, according to CME FedWatch. Traders expect higher interest rates by the end of the year due to US-Iran tensions.