Fed Cautioned: Inflation Data Signals Slowdown on Rate Cuts

Chicago Fed President Austan Goolsbee stated on Saturday that recent inflation data constitutes "bad news" for the U.S. Federal Reserve. He stressed that the central bank must exercise caution and await inflation's decline before enacting interest rate cuts. Goolsbee noted that inflation is increasing even in service sectors less affected by external factors like tariffs or oil prices, particularly amidst the U.S.-backed conflict in Iran. The current inflation composition appears unfavorable. These inflation risks have intensified recently due to rising oil prices. The Federal Reserve recently maintained its policy interest rate in the 3.5% to 3.75% range, with a divided vote reflecting differing views on the future path of monetary policy, particularly regarding potential rate cuts. Goolsbee acknowledged the complexities of providing forward guidance on monetary policy, referencing the split decision. He also commented on the transition of Fed leadership, expressing appreciation for Chair Jerome Powell's continued input as a governor and excitement for the incoming Chair Kevin Warsh.