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Chicago Fed’s Goolsbee says central bank ‘has definitely got work to do’ on inflation
Chicago Federal Reserve President Austan Goolsbee said inflation data suggest the central bank has more work to do to restore its credibility and return inflation to target. He warned that price pressures appear to be rising again, making a rate increase at the Fed’s next meeting a possibility.
US producer prices rose 0.3% in October, below expectations, but were up 6.5% year on year, their largest annual gain since November 2022. Consumer prices also rose slightly more than expected; markets were pricing in a quarter-point rate increase for the 8–9 December meeting, with a greater than 10% chance of a half-point rise. Goolsbee, who is not currently a voting member, cited persistent supply pressures and demand linked to AI data-centre construction.
In short
- Goolsbee says inflation is moving further from the Fed’s 2% target.
- Producer prices rose 6.5% year on year in October.
- Markets expect a rate rise in December, with a smaller chance of a larger move.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
A rate rise could help curb persistent price pressures and show that the Fed remains committed to restoring inflation to target. If supply constraints and strong demand are keeping prices elevated, acting now may reduce the risk that inflation becomes entrenched and requires more disruptive action later.
The case against
The latest producer-price rise was below expectations, and one month of data may not establish that inflation is accelerating again. Raising rates could restrain investment and household demand, including activity tied to data-centre construction, while doing little to ease supply pressures; waiting for clearer evidence could avoid tightening too far.
Explained simply
The Federal Reserve, often called the Fed, is the US central bank. It aims to keep prices stable and sets interest rates, which influence borrowing costs for households and businesses. Inflation is the pace at which prices rise.
Austan Goolsbee leads the Federal Reserve Bank of Chicago, one of the Fed’s regional banks. The Fed’s policy decisions are made by a committee, and Goolsbee does not currently have a vote on it. The committee adjusts rates as it judges whether inflation is moving towards its 2% target.
Inflation matters because it affects the cost of everyday goods and services, while higher interest rates can make loans and mortgages more expensive. The Fed weighs these effects when deciding how to bring inflation under control without putting undue strain on the economy.