Fed’s Goolsbee Calls October Inflation Report ‘Borderline Disturbing’ as Central Bank Weighs Further Hikes

Austan Goolsbee, president and chief executive officer of the Federal Reserve Bank of Chicago, said the latest inflation data was “borderline disturbing.”

“It’s another distressing report — borderline disturbing,” Goolsbee said in an interview with the PBS NewsHour on Tuesday.

“We’ve got a real inflation issue on our hands that has been developing,” he said. “We’re going to have to deal with that.”

The consumer price index rose 0.4% on a seasonally adjusted basis in October, according to the Bureau of Labor Statistics’ Tuesday morning release. That was higher than economists had predicted and marked the third straight month of above-trend price increases.

Goolsbee said he had hoped that factors such as tariffs would fade over time, but that had not happened as he had hoped. He also said that persistently high inflation in services remained a concern.

The Chicago Fed president said lofty prices were a top issue for many people he has met.

“It’s on everyone’s mind,” Goolsbee said. “It’s on business minds. It’s on nonprofits’ minds. It’s on ordinary consumers’ minds.”

The latest inflation report landed at a critical juncture for central bank officials as they weighed their next interest-rate move and possible moves in the months ahead if the numbers continued to come in hot.

Goolsbee’s comments came after other Fed officials made remarks Tuesday, saying the rate-setting Federal Open Market Committee may need to act more decisively to rein in inflation.

When the Fed raises or lowers rates, it typically moves by a quarter-percentage point. But Fed Governor Christopher Waller said in London early Tuesday that a hot inflation report could push him toward advocating for a half-point increase in December, and he said such a hike should be on the table if core CPI, a metric that excludes volatile food and energy costs, was “around 0.3.” Hours later, that is exactly what happened.

Dallas Fed President Lorie Logan, speaking Tuesday after the inflation report, said she saw a need for two additional quarter-point increases and said “it may be possible to move more rapidly this winter than the FOMC has moved so far this fall.”

The rate-setting committee raised rates by a quarter point in September, to a range of 3.75%-4%, before voting to hold them steady in October.

After years of higher-than-preferred price growth, Goolsbee said the possibility of consumers and businesses beginning to expect hot inflation is a “major concern.” If that does happen, he said, it can make the process of cooling inflation “much more painful.”

But Goolsbee did not specify whether he thought the Fed should hike rates at its December policy gathering as a result of these concerns.

“I’m not a fan of being very specific and tying our hands at the next meeting or meetings in the future,” Goolsbee said.

Waller, Logan and Paulson are voting members of the FOMC this year, which means they will cast votes on whether to raise rates at the committee’s final meeting of the year in December. Goolsbee will be a voting member next year.

In the wake of the inflation report and the remarks from the various Fed officials, Fed funds futures were now unanimously expecting a rate hike at the December meeting, according to the CME’s FedWatch tool.

Now the question is about whether the central bank will raise rates by a quarter or half percentage point. The Fed funds futures currently put the odds of a half-point hike at the upcoming December meeting at 15%.

Odds of rates reaching 4.25%-4.5% by the January meeting — the equivalent of either a single half-point rise or two quarter-point hikes — were now at 60%, with a 10% chance of rates hitting 4.5%-4.75% by then.

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