Why bond yields hit quarter-century highs, according to the Fed's Austan Goolsbee

• September's inflation report was 'discouraging,' with services inflation over 5% and core inflation above 4%, which Goolsbee deems 'totally unacceptable.'
• Business contacts in the Midwest indicate demand-side overheating, not just supply shocks, as a primary driver of rising costs and prices.
• Goolsbee highlighted the Fed's 'legal mandate' to achieve 2% inflation, suggesting a need for continued vigilance and potential policy action if current trends persist.
• Long-term bond yields spiking to quarter-century highs are attributed to factors like fiscal positions, faster growth, and high demand for capital from the AI sector.

Chicago Fed President Austan Goolsbee expressed discouragement over September's hotter-than-expected inflation report, particularly the persistent services and core inflation. He noted that demand-side overheating, fueled by strong consumer spending and AI data center build-out, is a significant concern, emphasizing the Fed's commitment to bringing inflation back to its 2% target.