Federal Reserve Bank of Chicago President Austan Goolsbee said he is less optimistic about progress on inflation, signaling that the central bank is not yet ready to consider lowering interest rates after five years of inflation above the 2% target.
"I'm less optimistic," Goolsbee said in an interview with Bloomberg Television on Friday. "We just haven't been having that now for some time. And that's makes me more concerned."
While recent data showed the U.S. job market remains "pretty stable," Goolsbee emphasized that inflation is the primary focus for policymakers. He noted that after a period of improvement, progress on disinflation has not only stopped but has been "going the wrong way lately."
The Chicago Fed chief’s remarks suggest that the Federal Reserve is likely to maintain its restrictive monetary policy stance. The current federal funds rate sits at 5.25% to 5.50%, and markets may now price in a longer period of elevated rates, potentially impacting bond yields and equity valuations. The next FOMC meeting is scheduled for June 11-12.
Inflation Remains the Primary Obstacle
Goolsbee's main concern is the lack of continued progress toward the Fed's 2% inflation goal. He pointed to a stall in disinflationary trends last year, which he had hoped would be temporary.
"The hope was the pause in progress was going to be temporary," he said. However, with the addition of an oil shock on top of existing tariff impacts, the timeline for a return to the inflation target has become more uncertain. "We're not really sure if or when that part is going to go away," Goolsbee added, concluding that for him, "inflation... that's the topic of the moment."
Job Market Provides Limited Comfort
Goolsbee characterized the labor market as "stable without being good," indicating that it is not currently a major concern for the Fed. He observed that the unemployment rate is holding steady and payroll growth is "decently positive."
However, the stability in the job market is not enough to sway the Fed toward a more dovish stance in the face of persistent inflation. Goolsbee's comments make it clear that the path of future rate decisions will be almost entirely dependent on incoming inflation data.
This article is for informational purposes only and does not constitute investment advice.
