Fed's Goolsbee calls for a hold on cuts as current rate of inflation is 'not good enough'

• Core inflation remains at 3% as of December, up 0.2 percentage points from November, driven by service sector pressures and stubbornly high housing costs beyond tariff impacts
• Goolsbee called 3% inflation 'not good enough' and warned that 'stalling out at 3% is not a safe place to be,' emphasizing the need for vigilance before cutting rates further
• Markets expect the Fed to hold rates until at least June, with futures showing 50% probability of a June cut and 71% probability of a July cut after three quarter-point cuts in late 2025

Summary: Fed's Goolsbee Signals Pause on Rate Cuts Amid Persistent Inflation

Chicago Federal Reserve President Austan Goolsbee stated Tuesday that interest rate cuts should be postponed until clearer evidence emerges that inflation is declining toward the Fed's 2% target. Speaking at the National Association for Business Economics annual gathering in Washington, D.C., Goolsbee emphasized that "front-loading too many rate cuts is not prudent" given current economic conditions.

Key Data Points

• Core inflation (PCE index): Currently at 3% for December, up 0.2 percentage points from November
• Fed target: 2% inflation rate
• Goolsbee characterized the 3% inflation level as "not good enough" and warned that "stalling out at 3% is not a safe place to be"

Market Implications

Futures markets indicate expectations that the Federal Open Market Committee will hold rates steady until at least mid-2025:

• 50% probability of a rate cut in June
• 71% probability of a cut by July

The Fed previously implemented three quarter-point cuts in late 2025.

Contributing Factors

Inflation pressures stem from multiple sources beyond temporary tariff impacts, including:

• Persistent housing inflation (not tariff-driven)
• Underlying service sector pressures
• Areas unaffected by trade duties

Additional Fed Commentary

Fed Governor Christopher Waller, typically dovish on rates, took a measured stance, noting improved labor market conditions may reduce the need for cuts. However, he questioned whether January's payroll data represented genuine improvement or statistical noise.

Goolsbee noted consumer concerns about prices remain pressing, urging policymakers to avoid repeating past mistakes of assuming inflation would be transitory.