Chicago Federal Reserve President Austan Goolsbee expressed concern about the latest inflation data, telling CNBC on Friday that the central bank will likely need to take action.
“I think the central bank definitely has work to do to continue to reestablish its credibility,” the policymaker said during an interview on “Squawk Box.”
His remarks came shortly after the Bureau of Labor Statistics reported that the producer price index, considered a proxy for wholesale prices, recorded a 0.3% increase in October, which was slightly lower than expected but also indicated an annual gain of 6.5%, the largest since November 2022.
With data available earlier in the week showing the consumer price index rose a little more than expected during the month, Goolsbee said the Fed was moving further away from its 2% inflation target.
“We have been above 2% for almost six years, and although sometimes we are making progress, lately we are not making any progress and, on the contrary, it is going in the wrong direction,” he said.
“Inflation is rising. It’s proven to be much more persistent than we initially expected because of supply shocks, and now we add in this old-fashioned overheating of demand from AI data center construction, which seems to be starting to expand out of its way,” Goolsbee added.
Markets are fully pricing in a quarter-percentage-point increase when the Federal Rate-Setting Committee meets Dec. 8-9. There is also a greater than 10% chance of a half-point rise, according to the CME Group’s FedWatch Futures Indicator. Goolsbee is not currently an FOMC voter but will be in 2027.
Earlier in the week, Fed Governor Christopher Waller indicated he would consider a 50 basis point increase based on this week’s inflation data.
Goolsbee did not directly speculate on whether the Fed needs to be more aggressive.
“It’s all going to revolve around this…question: What’s happening to inflation, and are we on track to get back to 2%?” he said. “My feeling is that’s not the case at the moment.”
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