Chicago Fed’s Goolsbee Says Core Inflation Remains Too High, Moving in Wrong Direction

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said on June 25 that core inflation remains elevated.

Speaking to CNBC, Goolsbee said the U.S. personal consumption expenditures price index for May showed services inflation is still well above where it should be.

He said there were some hopeful signs in the services sector, but he did not want to read too much into them. Core inflation, which excludes food and energy, remains too high and is moving in the wrong direction, he said.

The U.S. core PCE price index rose 3.4% in May from a year earlier and 0.3% from the previous month. The annual increase was the highest since October 2023.

Goolsbee also raised the possibility that optimism about technological advances such as artificial intelligence could boost asset prices and consumption, adding to inflation pressure.

If expectations for future productivity gains from AI and other technologies are reflected in valuations today, and people spend on the back of that future prosperity, the situation changes, he said. The more he sees that, the more anxious it makes him, he added. He said it could lead to inflationary overheating.

Goolsbee also expressed support for a planned change in how Fed Chair Kevin Warsh communicates monetary policy. He said he has long felt uncomfortable with the routine practice of projecting future interest rates through forward guidance, including the dot plot. While he does not object to the dot plot itself, he said he does not like the idea of effectively promising where rates will be three years from now.

Han Kyung-woo, Hankyung.com reporter case@hankyung.com