Fed's Goolsbee: Inflation moving the wrong way

Chicago Federal Reserve President Austan Goolsbee stated that inflation is trending unfavorably, indicating the Federal Reserve has significant work ahead to restore its credibility. He highlighted that inflation has persistently remained above the Federal Reserve's 2% target for approximately six years. Goolsbee specifically cited two major factors contributing to current price pressures. The first is the persistent nature of inflation stemming from supply shocks, which has proven more enduring than initially forecasted. The second factor is a resurgence of demand-driven inflation, described as 'old-fashioned demand overheating,' largely attributed to the extensive buildout of AI data centers, which appears to be expanding its economic influence.

Market participants are currently pricing in a quarter-point interest rate increase for the Federal Open Market Committee's upcoming meeting from December 8-9. Goolsbee, who will not have a vote on the FOMC this year but is slated to vote in 2027, emphasized that the central bank's actions will hinge on inflation trends and the progress toward the 2% target. He indicated that current conditions suggest the nation is not on track to meet this goal. His remarks follow recent economic data, including the producer price index rising 0.3% in October and the consumer price index increasing by 0.4% the same month, with core CPI up 0.3%.