Chicago Fed President Goolsbee says inflation is too high; Williams sees price pressures easing
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- Austan Goolsbee said inflation is "trending the wrong way" but pointed to "a little bit of improvement" in services inflation, declining to speculate on the future rate path during a CNBC interview from the Cboe trading floor
- Core PCE inflation hit 3.4% in May, its highest since October 2023, with goods up 0.4% and services up 0.5% (the most since January), driven by a 6.5% energy jump and 0.8% acceleration in transportation services
- Goolsbee backed new Fed Chairman Kevin Warsh's decision to strip forward guidance from FOMC statements, calling it a "healthy" reset and dispelling tension rumors by noting he and Warsh were "foxhole bodies" during the global financial crisis
- John Williams said he expects inflation to begin trending lower, projecting it will fall to 3.5% this year from its current 4.1% and reach the Fed's 2% target on a "glide path" by 2028
- Williams cited three reasons for his optimism: waning tariff impact, hopes the Iran war is nearing an end to ease energy prices, and moderating rent increases slowing shelter inflation
- The FOMC next meets July 28-29, with CME FedWatch pricing roughly a 30% chance of a rate hike; Goolsbee is a nonvoting participant this year (gains a vote in 2027) while Williams is a permanent voter
Why it matters: With core PCE hitting 3.4% — its highest since October 2023 — and markets pricing a 30% chance of a September rate hike, the gap between stubborn hard data and officials' optimistic tone leaves the rate path unresolved. Williams' explicit bet that the Iran war is nearing an end to ease energy prices signals he sees multiple inflation pressures cooling simultaneously.
