More evidence is needed that inflation is on the way down before interest rate cuts would be appropriate, Chicago Federal Reserve President Austan Goolsbee said Tuesday.
Recent indicators show that inflation is off its highs but still above the Fed’s 2% target, Goolsbee said. He noted that policymakers “have been burned by assuming transitory inflation” in the past and shouldn’t make the same mistake again.
“I feel that front-loading too many rate cuts is not prudent in that circumstance,” Goolsbee said in remarks before the National Association for Business Economics at its annual gathering in Washington, D.C. “People express that prices are one of their most pressing concerns. Let’s pay attention. Before we cut rates more to stimulate the economy, let’s be sure inflation is heading back to 2%.”
CNBC noted that the most recent inflation data, for December, revealed that core inflation, which excludes volatile food and energy prices, was running at 3%, as measured by the consumption expenditures price index, the Fed’s primary forecasting gauge.
The rate was up 0.2 percentage points from November and came about partly because of tariffs, which are viewed as temporary, but also due to underlying pressures in the service sector and areas not directly impacted by the duties.
Fed Needs to be ‘Vigilant’
CNBC said that specifically, Goolsbee said that persistently high housing inflation isn’t tariff driven, and he emphasized the need for the Fed to be “vigilant.”
Goolsbee noted that a 3% inflation rate “is not good enough — and it’s not what we promised when the Federal Reserve committed to the 2% target. Stalling out at 3% is not a safe place to be for a myriad of reasons we know all too well.”
Goolsbee has said previously that he thinks the Fed will be able to cut later in the year.
His remarks come with markets expecting the Federal Open Market Committee, of which Goolsbee is a voter this year, to hold steady until at least June and probably July. Futures traders are placing about a 50-50 chance of a cut in June and about a 71% probability of a July reduction, according to the CME Group’s FedWatch gauge.
In the latter part of 2025, the Fed enacted three-quarter percentage point cuts.
Meanwhile, Fed Governor Christopher Waller, who has been an advocate for lower rates, took a more measured approach Monday while also speaking to the NABE conference.
Waller said he thinks policymakers should “look through” tariff impacts, and he said recent data shows the labor market may be in better shape than previously indicated, mitigating the need for further cuts.
Should the jobs picture continue to improve, that would further lessen the case for cuts, though Waller said he isn’t convinced that the January nonfarm payrolls data wasn’t “more noise than signal.”
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