Fed’s Goolsbee calls for a hold on cuts as current rate of inflation is ‘not good enough’

Chicago Federal Reserve President Austan Goolsbee said Tuesday that rate cuts are not appropriate until more evidence emerges that inflation is on the path to decline.

With recent indicators showing inflation well off its highs but still above the Fed’s 2% target, Goolsbee noted that policymakers had “skipped the assumption of temporary inflation” in the past and should not make the same mistake again.

“I don’t think it’s prudent to front-load too much of a rate cut in this situation,” he said at the annual meeting of the National Association for Business Economics in Washington, D.C. “People say prices are one of their most pressing concerns. Let’s pay attention. Let’s make sure inflation gets back to 2% before we cut interest rates further to stimulate the economy.”

The latest inflation data for December showed core inflation, which excludes volatile food and energy prices, at 3%, as measured by the consumption expenditures price index, the Fed’s primary forecast gauge. This was a 0.2 percentage point increase from November and was driven by tariffs that were viewed as temporary, as well as underlying pressures in the service sector and areas not directly affected by the taxes.

In particular, Goolsbee emphasized that the Fed must be “vigilant,” saying that persistently high housing inflation is not caused by tariffs.

Goolsbee stated that a 3 percent inflation rate “is not good enough and not what we promised when the Federal Reserve committed to the 2 percent target.” “For countless reasons that we know very well, lingering at 3 percent is not a safe place to be.” He has previously said he thinks the Fed could cut rates later in the year.

The remarks come as markets expect the Federal Open Market Committee, of which Goolsbee is a voter this year, to remain on hold until at least June and possibly July. According to CME Group’s report, futures investors predict a discount of approximately 50-50 in June and a discount of approximately 71% in July. FedWatch measures. The Fed cut interest rates by three quarter points in the second half of 2025.

Fed Governor Christopher Waller, an advocate for lower interest rates, took a more measured approach when speaking at the NABE conference on Monday.

While Waller said he thought policymakers should “examine” tariff impacts, he said recent data showed the labor market may be in better shape than previously indicated, reducing the need for further cuts. If the employment picture continues to improve, this will further reduce the likelihood of disruption; But he said he wasn’t convinced that the January nonfarm payrolls data was “more noise than signal.”

Tuesday will be an active day for Fed speakers, with Governor Lisa Cook also presenting to NABE later in the morning.