Austan Goolsbee, President of the Federal Reserve Bank of Chicago and not a voting member of the Federal Open Market Committee (FOMC) in 2026, warned on Friday that inflation is broad-based and going the wrong way.
He said it has spread into categories where prices are not being driven by energy, and that it is proving far more persistent than expected back when it looked like just a matter of supply shocks. Goolsbee also flagged demand.
The Fed cannot look through inflation if demand is overheating, he said, and the data centre buildout is pushing prices up. The policy implication is direct: inflation will determine the path of rates. On the labor market, he described conditions as stable, maybe tightening a bit, but urged caution in judging its effect on inflation, because wages are a lagging indicator of price pressures.
Key Quotes:
Inflation
Inflation is broad-based and going the wrong way
Inflation has spread into categories where prices are not being driven by energy
Inflation is rising and proving far more persistent than expected when it was just a matter of supply shocks
Services inflation and rising health care costs don’t feel like they will change quickly
Growth & Economy
Cannot look through inflation if demand is overheating; data centre buildout is pushing up prices
Monetary Policy
Inflation will determine path of rates
Labor Market
Labor market stable, maybe tightening a bit
We need to be careful about assessing labor market impact on inflation, because wages are a lagging indicator of price pressures