Goolsbee Says the Federal Reserve Still Has Work to Do on Inflation

Table of Contents

• You might want to know
• Main Topic
• Key Insights Table
• Afterwards...

You might want to know

• Why does Austan Goolsbee believe the Federal Reserve needs to act on inflation?
• What do the latest producer and consumer price figures suggest about the Fed’s progress toward its 2% target?

Main Topic

Chicago Federal Reserve President Austan Goolsbee has warned that the central bank still has work to do to address inflation and restore confidence in its commitment to price stability. Speaking to CNBC on Friday, Goolsbee said recent economic indicators had made him concerned that inflation was not moving back toward the Federal Reserve’s target. His comments followed the release of new producer-price data and came after figures earlier in the week showed consumer prices had risen more than expected.

“I believe that the central bank has definitely got work to do to continue to reestablish its credibility,” Goolsbee said during an interview on CNBC’s “Squawk Box.” His remarks highlighted the challenge confronting policymakers: the Fed aims to bring inflation down to 2%, but the latest data, in his assessment, did not show convincing progress toward that goal.

The Bureau of Labor Statistics reported that the producer price index, a measure often treated as a proxy for wholesale prices, increased by 0.3% in October. That monthly increase was slightly below expectations. However, the index also showed a 6.5% annual gain, its highest since November 2022. The two measures offer different perspectives: the monthly result was somewhat softer than forecast, while the annual figure pointed to substantial price growth compared with a year earlier.

The producer price index tracks prices received by domestic producers for their goods and services. It can provide an indication of cost pressures that may eventually affect businesses and consumers, although movements in wholesale prices do not translate directly or immediately into retail inflation. For the Fed, the figures are one component of a broader assessment that also includes consumer prices, economic activity, labor-market conditions, and other indicators.

Consumer-price data released earlier in the week had also raised concerns. The consumer price index rose a bit more than expected during the month, according to the source report. Goolsbee said that, taken alongside the producer-price figures, the recent evidence suggested the Fed was moving farther away from its inflation objective rather than closer to it.

“We’ve been above 2% for almost six years, and while it sometimes we were making progress, lately we’re not making any progress, and if anything, it’s going the wrong way,” he said. His assessment reflects a distinction between the long-term inflation goal and the current direction of the data. Even if prices are not accelerating in every category, persistent inflation can still make it difficult for policymakers to demonstrate that price growth is returning sustainably to the target.

Goolsbee also pointed to possible forces behind the persistence of inflation. He said price increases had proved more durable than officials anticipated when supply shocks first affected the economy. He then raised a separate concern: demand associated with the expansion of artificial-intelligence data centers. In his view, the scale of that buildout may be creating a form of demand overheating that could extend beyond the sector itself.

“Inflation is rising. It’s proved far more persistent than we predicted at the beginning from the supply shocks, and now we’re adding this old-fashioned demand overheating coming from the AI data center buildout, that looks like it’s starting to spread out of its lane,” Goolsbee said. The comment did not establish that data-center construction was the sole or principal cause of inflation. Rather, he identified it as a potential demand-related pressure that policymakers may need to consider as they evaluate how broad and persistent price increases have become.

The distinction between supply-driven and demand-driven inflation matters for central-bank decision-making. Supply disruptions can raise costs even when demand is not unusually strong, while excess demand can put upward pressure on prices when spending outpaces the economy’s capacity to provide goods and services. In practice, both kinds of pressures can occur at the same time. Goolsbee’s remarks suggest that he sees the current inflation challenge as involving not only lingering effects from earlier supply shocks, but also emerging demand pressures.

Financial markets were described as fully pricing in a quarter percentage point increase when the Federal Open Market Committee next meets on Dec. 8-9. The CME Group’s FedWatch gauge of futures markets also showed a better than 10% probability of a half-point hike. These figures reflect market expectations, not a confirmed decision by the Fed. The committee’s eventual choice would depend on its assessment of incoming information and the outlook for inflation and the economy.

Goolsbee is not currently a voter on the Federal Open Market Committee, the body responsible for setting the federal funds rate, but he is scheduled to become a voter in 2027. His comments therefore express his public assessment of the economic outlook, but they do not, by themselves, determine the committee’s policy decision.

Earlier in the week, Federal Reserve Governor Christopher Waller said he would consider a 50 basis point move, depending on that week’s inflation data. The reference to a larger possible move underscored that policymakers may be weighing different responses as they review the latest figures. Neither Waller’s comments nor Goolsbee’s remarks amounted to a final policy announcement.

Goolsbee did not directly speculate about whether the Fed would need to take a more aggressive approach. Instead, he framed the issue around the direction of inflation and the central bank’s ability to return it to its objective. “It’s all going to be about this question: What is happening to inflation, and are we on path back to 2%?” he said. He then stated his view: “My feeling is, right now we’re not.”

This emphasis on the inflation trajectory points to the central uncertainty facing policymakers. A single report can affect expectations, but the Fed typically evaluates a run of data to judge whether price pressures are easing consistently. The October producer-price increase was slightly less than expected on a monthly basis, yet the annual rate remained elevated. Meanwhile, the consumer-price figure was somewhat stronger than expected. Together, those details help explain why Goolsbee focused on the overall direction rather than on one headline measure alone.

For households and businesses, the policy debate matters because interest-rate decisions can influence borrowing costs and financial conditions. Higher rates can cool demand over time, but they can also make loans more expensive. The Fed’s task is to assess how much restraint is needed to bring inflation down without creating unnecessary economic disruption. Goolsbee’s comments communicate concern about inflation’s persistence, while leaving the timing and scale of any policy action to the committee’s deliberations.

Key Insights Table

Afterwards...

The next stage of the debate will depend on whether subsequent inflation reports show sustained progress toward the Federal Reserve’s 2% objective. The figures cited by Goolsbee present a mixed picture: October producer prices rose less than expected month to month, but the annual increase remained high, while consumer prices also came in somewhat stronger than expected.

Policymakers will have to weigh those indicators against the broader economic outlook and determine whether existing policy is restrictive enough. Market expectations may shift as new data arrive, but they are not a substitute for the committee’s decision. Goolsbee’s central message is that officials must judge whether inflation is genuinely moving back toward 2%—and, in his current assessment, the available evidence has not yet provided that reassurance.