Goolsbee: Fed Rate Cuts Still a Distant Prospect

Fed Official Warns on Inflation Data Chicago Federal Reserve President Austan Goolsbee stated on Saturday, May 2, that recent inflation data was "bad news" for the U.S. Federal Reserve, indicating a need for caution regarding interest rate cuts. Goolsbee emphasized that the Fed requires assurance of a return to its 2% inflation target before considering reductions.

The Personal Consumption Expenditures (PCE) price index, the central bank's preferred inflation measure, rose at an annual rate of 3.5% in March. Goolsbee noted that inflation is increasing even in service industries, which are typically less affected by tariffs or oil price fluctuations. He described the current composition of inflation as not looking favorable.

The Federal Reserve maintained its policy interest rate in the 3.5% to 3.75% range at its recent meeting, a decision reached with an 8-4 vote. This split was the most divided since 1992, with three dissenting votes opposing language that suggested the Fed's next move would likely be a rate cut. Goolsbee, who is not a voting member on rate policy this year, had previously dissented against a rate cut in December due to rising inflation risks.