Chicago Federal Reserve President Austan Goolsbee said Friday that the central bank is drifting further from its 2% inflation target and still has work to do to rebuild its credibility, after fresh data showed wholesale prices rising at their fastest annual pace in four years.
In a televised interview, Goolsbee said further action was needed to rebuild the central bank’s credibility. His comments followed the Bureau of Labor Statistics’ report that the producer price index rose 0.3% in October, slightly below expectations. The annual gain reached 6.5%, the highest since November 2022.
Inflation moving ‘the wrong way’
The PPI figures came after consumer price data earlier in the week showed the CPI rose a bit more than expected for the month. Goolsbee said the readings leave the Fed further from its goal.
Goolsbee said inflation had remained above the Fed’s 2% target for almost six years. Although progress had been made at some points, he said recent readings showed the pressure persisting and moving further from the goal.
He described inflation as far more persistent than policymakers expected when supply shocks first drove prices up, and pointed to a newer source of demand pressure: the buildout of AI data centers, which he said looks like it is starting to spread out of its lane.
December rate decision in focus
Futures markets are fully pricing a quarter-percentage-point increase at the Federal Open Market Committee’s Dec. 8-9 meeting, with a better than 10% probability of a half-point move, according to CME Group’s FedWatch measure. Those probabilities reflect market positioning, not a decision by the committee.
Goolsbee is not a voting member of the FOMC this year but will vote in 2027. Fed Governor Christopher Waller said earlier in the week that he would entertain a 50 basis point move depending on the week’s inflation data, opening the door to a larger increase than the quarter-point move markets expect.
Goolsbee did not say whether he favored a more aggressive increase. He said the decision depended on the inflation outlook and whether prices were on a path back to 2%; his current assessment was that they were not.