CPI data was ‘discouraging’
Service inflation in CPI was a concern
Key to focus on trend of inflation, not one report
Hearing about cost and prices from contacts, not hearing about worries about recession
Hopes energy will fade soon from inflation data
The economy has work to do on the inflation side
Is not a fan of telegraphing Fed moves ahead of meetings
There is no ambiguity for Fed if economy is solid and inflation is high
Fed must prevent the build up of overheating
Is more optimistic about outlook relative to other Fed officials
Evidence building inflation hasn’t been transitory amid continued shocks
Need to keep a close eye on service sector inflation
More bad months of inflation would be unacceptable
Fed will get inflation back to 2%
Doesn’t want to tie hands on monetary policy outlook
If current inflation levels hold policy would need to address that
Consumers, GDP and investment levels have been strong
AI hype could cause even more tech sector investment, would risk overheating
Slowdown in AI investment doesn’t have to mean recession
Want to keep eye on financial stability implications of AI investment
Chicago Fed President Austan Goolsbee called today’s CPI data discouraging and said that if current inflation levels hold, policy would need to address that.
He said evidence is building that inflation hasn’t been transitory amid continued shocks and that more bad months of inflation would be unacceptable. He flagged services inflation as a concern and said he hopes energy will fade from the data soon, though he stressed the importance of focusing on the trend rather than any one report.
Goolsbee said there’s no ambiguity for the Fed when the economy is solid and inflation is high, and that the Fed must prevent overheating from building. Consumers, GDP and investment have been strong, and his contacts are talking about costs and prices, not recession. He said he’s more optimistic about the outlook than other Fed officials.
On AI, he warned that hype could drive even more tech investment and risk overheating, and said the Fed needs to watch the financial stability implications. A slowdown in AI investment wouldn’t necessarily mean a recession, he added.
Goolsbee said he doesn’t want to tie his hands on policy and isn’t a fan of telegraphing moves ahead of meetings. After today’s CPI report,the market is pricing in a 40% chance of a hike later this month. We will hear from Warsh late tomorrow then the Fed goes into blackout on Saturday.
This article was written by Adam Button at investinglive.com.
