Chicago Fed's Goolsbee Flags Inflation Persistence, Says Fed Has Work To Do

What Goolsbee said on air

Chicago Fed President Austan Goolsbee told CNBC's Squawk Box he is uneasy with the direction of inflation and that policymakers have "work to do" to restore credibility. As he put it, "I believe that the the central bank has definitely got work to do to continue to reestablish its credibility."

He said the Fed is drifting away from its goal. "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.

Goolsbee added that price pressures have stuck around longer than expected and highlighted new demand from AI data center buildouts. "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," he said.

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The latest data and market odds

Fresh numbers from the Bureau of Labor Statistics showed the producer price index, a gauge of wholesale prices, increased 0.3% in October, a bit under forecasts. On a 12-month basis it climbed 6.5%, the fastest since November 2022. Earlier this week, the consumer price index also came in slightly above expectations for the month.

Market pricing points to a 0.25 percentage point hike at the Federal Open Market Committee's Dec. 8-9 meeting, and CME Group's FedWatch tool assigns just over a 10% chance to a 0.5-point increase. Fed Governor Christopher Waller said earlier he would be open to a half-point increase if this week's inflation readings supported it. Goolsbee did not speculate on whether the Fed should step up the pace. He is not voting on policy this year but will be an FOMC voter in 2027.

What this means for your portfolio

In plain English: inflation is still the main character in the Fed's story, and markets are lining up for another rate increase in December with a nontrivial chance of a bigger move. That keeps the path of policy tethered to the next few inflation prints and the AI-driven demand pulse Goolsbee flagged.

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