Chicago Fed President Austan Goolsby told CNBC on Friday he expressed concern about the latest inflation numbers and said the central bank would likely need to take action.
“I believe the central bank certainly has work to do to continue to restore credibility,” the policymaker said in an interview with Squawk Box.
His comments came shortly after the Bureau of Labor Statistics reported that the producer price index, considered a proxy for wholesale prices, rose 0.3% in October, slightly less than expected, but for an annualized increase of 6.5%, the highest since November 2022.
Goolsby said the Fed is moving further away from its 2% inflation target following data earlier this week showing the consumer price index rose slightly more than expected during the month.
“It’s been above 2% for almost six years, and at times we’ve made progress, but recently we haven’t made any progress at all and if anything, we’re moving in the wrong direction,” he said.
“Inflation is rising. The supply shock is proving to be much more persistent than originally predicted. And now, with the addition of some old-fashioned demand overheating from the build-up of AI data centers, it looks like that inflation is starting to spread out of the lane,” Goolsby added.
Markets are fully pricing in a quarter-point rate hike when the Federal Open Market Committee, which sets interest rates, next meets on December 8-9. The probability of a half-point hike is more than 10%, according to CME Group FedWatch futures market indicators. Mr. Goolsby is not currently a member of the FOMC, but plans to become one in 2027.
Earlier this week, Fed Director Christopher Waller suggested he could consider a 50 basis point move depending on this week’s inflation data.
Goolsby did not speculate directly on whether the Fed needs to be more aggressive.
“Everything is going to be related to this…The question is, what’s going on with inflation and are we on the way back to 2%?” he said. “My sense is that it’s not the case right now.”
