Chicago Fed's Goolsbee Says Persistent Inflation Is Unacceptable, Signals Further Tightening Risk

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, raised concerns about September inflation data and signaled the possibility of further monetary tightening. While it is still too early to decide whether to raise interest rates again, he said the Federal Reserve would need to respond if elevated inflation persists.

In an interview with Yahoo Finance on October 14, Goolsbee said September's Consumer Price Index was disappointing and that there were few signs of improvement in services inflation. He added that rising services prices are difficult to explain by tariffs or oil alone, suggesting inflation pressures could last longer.

The monthly pace of core inflation, when annualized, is running above 4%, he said. Higher energy prices were expected, but it is troubling that prices for goods and services excluding energy are also rising.

He added that goods inflation, which should be easing if tariff effects are temporary, has not cooled enough.

Goolsbee said it is still difficult to judge whether current interest rates are high enough to bring inflation back to the Fed's 2% target. More data is needed to confirm the inflation trend before any additional rate increase, he said. Still, a few more months of core inflation running at recent levels would be unacceptable and would require a policy response.

He also pointed to overheating in artificial intelligence investment as a potential risk. Data center construction is pushing up costs by competing with other industries for electricians, construction materials and land.

If expanding AI investment creates demand that exceeds the economy's overall productive capacity, the Fed would need to respond, he said.

Goolsbee said the central bank's response is clear if employment remains stable while inflation continues to run above target. Rather than assuming inflation will rise temporarily and then cool on its own, policymakers need to confirm that price pressures are actually slowing, he said.