Chicago Federal Reserve President Austan Goolsbee said recent inflation data represented “bad news” for the United States central bank and underscored the need for policymakers to remain cautious about cutting interest rates until there is clearer evidence that inflation is moving back towards target.
Speaking on Fox News’ “The Journal Editorial Report” on Saturday, Goolsbee pointed to persistent inflation pressures as a reason for restraint in monetary policy decisions.
"The inflation side was bad news, in the last twelve months we are running higher than 3% inflation."
The comments followed data released last week showing the personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, rose at an annual rate of 3.5% in March, well above the Fed’s 2% objective.
“We have got to get some assurance that we are on a path back to the 2% inflation target,” Goolsbee said.
When asked whether the Federal Reserve had been too accommodative for too long, Goolsbee defended his long-held concerns about easing policy prematurely.
"I didn't want to front load the rate cuts, presuming that inflation is going to be transitory, it felt like the fed made that mistake before … I ended up dissenting last year on those grounds."
He also noted that recent inflationary pressures were particularly concerning because they were emerging even in service sectors that are largely insulated from tariff-related disruptions and the impact of rising oil prices linked to the US-backed war with Iran.
The composition of inflation now “doesn’t look good”, Goolsbee said, highlighting that underlying price pressures remain broad-based.
At its policy meeting last week, the Federal Reserve kept its benchmark interest rate unchanged in the 3.5% to 3.75% range. The decision was approved by an 8-4 vote, marking the most divided policy outcome since 1992.
Three of the dissenting officials objected not to the decision to hold rates steady, but to language suggesting the central bank’s next policy move would most likely be a rate cut.
Goolsbee said the split highlighted the challenges associated with offering “forward guidance” during periods of economic uncertainty. He noted that communicating likely future policy paths can become particularly complicated when inflation data remains mixed.
The discussion comes as the Federal Reserve prepares for a leadership transition. Current Fed Chair Jerome Powell is expected to remain on the Board of Governors after Kevin Warsh is confirmed by the Senate as the next Fed Chair in the coming weeks.
Goolsbee welcomed Powell’s continued presence at the central bank.
“I like (Powell) quite a lot. I will be happy he is going to switch to a governor’s seat but still be there. He has been judicious and he has insights,” Goolsbee said.
He also expressed optimism about the incoming chair’s leadership.
He said he was “excited” about Warsh’s arrival and added he was “excited to see him come in and see what mark he is going to make”.
