Chicago Federal Reserve President Austan Goolsbee said this week that the latest government consumer inflation report for last month contained an unexpected increase in services inflation, suggesting broader upward pressure on prices beyond movements in oil and items affected by tariffs.
Speaking to the Greater Rockford Chamber of Commerce in Rockford, Illinois, Goolsbee characterized the trend succinctly: inflation is "going the wrong way, and it’s going the wrong way not just in oil-related things and not just in tariff-related things." He emphasized that the rise in services costs is particularly worrisome.
On that point he said, "Services inflation is the part that I’m nervous about. I want to see that at least stop growing and hopefully start going back down because that can’t really be from oil prices." His remarks framed the services component as the element of the report least likely to be explained by energy price swings.
Goolsbee described the consumer price index release as having "not much that’s good," and singled out the uptick in services inflation as the "unexpected disappointment" within the data. He signaled concern that the widening scope of inflation could complicate the outlook for price stability.
Addressing the labor market, Goolsbee said conditions remain stable but "not good," indicating he sees the employment picture as steady without being healthy enough to be a comfort on inflation dynamics.
Beyond the data, Goolsbee spoke about central bank independence and its significance. He said he does not believe Fed independence would disappear if U.S. President Donald Trump’s nominee for Fed Chair, Kevin Warsh, were confirmed. He cautioned that a loss of central bank independence would risk allowing inflation to "come roaring back."
Goolsbee’s comments linked the recent CPI details to broader policy considerations, underscoring his focus on services inflation and the institutional safeguards he believes are necessary to prevent a resurgence of higher inflation.
Key points
- The government’s consumer inflation report for last month showed an unexpected rise in services inflation.
- Goolsbee said inflation is "going the wrong way," and highlighted services inflation as the most concerning element.
- He said labor market conditions are stable but not good, and defended central bank independence as crucial to preventing a return of high inflation.
Risks and uncertainties
- Rising services inflation could broaden price pressures beyond energy and tariff-driven areas - this may affect service-heavy sectors.
- If services inflation does not stop growing and start falling, it could complicate monetary policy decisions and market expectations.
- Potential threats to central bank independence could increase the risk of higher inflation returning, according to Goolsbee.