Chicago Fed's Goolsbee says central bank 'has definitely got work to do' on inflation

Chicago Federal Reserve President Austan Goolsbee expressed concern about the latest inflation data, telling CNBC on Friday that the central bank likely will need to take action. His remarks came shortly after the Bureau of Labor Statistics reported that the producer price index posted a 0.3% increase in October, indicating a 6.5% annual gain, the highest since November 2022.

Inflation Concerns

With consumer price index data showing higher-than-expected increases, Goolsbee said the Fed is slipping further away from its 2% inflation target. We've been above 2% for almost six years, and while we were sometimes making progress, lately we're not making any progress, and if anything, it's going the wrong way.

Rate Hike Expectations

Markets are fully pricing in a quarter percentage point increase when the rate-setting Federal Open Market Committee meets next on Dec. 8-9. There also is a better than 10% probability of a half-point hike, according to the CME Group's FedWatch gauge. Earlier in the week, Fed Governor Christopher Waller indicated he would entertain a 50 basis point move depending on inflation data.

Goolsbee attributed persistent inflation to supply shocks and "old-fashioned demand overheating coming from the AI data center buildout, that looks like it's starting to spread out of its lane." He did not speculate directly on whether the Fed might need to be more aggressive, stating: It's all going to be about this question: What is happening to inflation, and are we on path back to 2%? My feeling is, right now we're not.