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Chicago Fed president Austan Goolsbee said Friday he would like to see further progress on inflation falling to the Federal Reserve’s 2% mandate before supporting another rate cut.
He still has concerns about inflation, as he sees strong economic growth and a stable job market, and needs to see inflation moving back toward 2% before cutting interest rates.
“If we could get some more improvement on the inflation side, I think rates can still keep going down a fair bit more, but we just need to see the progress on inflation,” Goolsbee said in an interview with Yahoo Finance. “And we need to see that the job market remains steady like it has been for a couple of months here.”
A fresh reading of the Consumer Price Index for January, released Friday, showed prices rose 2.4% over the prior year. On a “core” basis, which excludes food and energy, prices rose 2.5% over the prior year. The Fed targets an inflation rate of 2% annually.
Read more: January CPI breakdown: Gas prices ease, housing costs remain elevated
Goolsbee said while there were signs of encouragement in Friday’s inflation report, there were also concerns. He said that goods prices, where the impact of tariffs is seen, appeared under control, but Goolsbee worries about higher services inflation, which he said is “not tamed” and is not driven by tariffs.
“The more concerning part is we’re still seeing pretty high services inflation, which is a thing which tends to be persistent,” Goolsbee said. “Let’s hope that we’ve seen peak impact of tariffs on inflation and that that part proves to be transitory.”
Goolsbee seemed to suggest that the Fed has room to cut rates further before the central bank hits what he sees as a neutral level of rates where economic growth is neither spurred nor restricted.
“I don’t know how restricted we are,” Goolsbee said regarding the current level of interest rates. “Inflation’s been above the target for more than 4.5 years now, and we need to see improvement in inflation, not just count on that it will improve on its own, before we start making the rate cuts.”
Data from the CME Group on Friday showed investors see a 90% chance that the Fed holds rates steady at the conclusion of its next policy meeting on March 18.
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