U.S. inflation climbed 0.4% in October on a seasonally adjusted basis. That brought three straight months of high price increases and led Chicago Federal Reserve President Austan Goolsbee to call the reading “borderline disturbing.”
Tuesday morning’s consumer price index release from the Bureau of Labor Statistics outpaced economist forecasts. The numbers landed ahead of central bankers deciding their next interest rate move. Goolsbee told PBS NewsHour that price pressures have developed into a genuine problem requiring a decisive response.
“We’ve got a real inflation issue on our hands that has been developing, and we’re going to have to deal with that,” Goolsbee said in the interview on Tuesday. He added that the issue dominates discussions with everyday consumers, business leaders, and nonprofits alike.
Goolsbee said that the expected easing of tariff impacts on goods has failed to materialize. Stubbornly high inflation in service sectors continues to cause alarm.
According to reporting on demand strength, the AI build-out resembles “old-fashioned demand overheating from excess stimulus that’s coming from massive hype about AI overloading the economy in the short run,” as Goolsbee described. Strong corporate profits have stemmed from high consumer demand alongside massive expansion in the technology industry, according to remarks from Tom Barkin, who heads the Richmond Fed.
During the middle of October, Fed Governor Christopher Waller pointed out that inflation driven by artificial intelligence could last for multiple years. Hardware and computing infrastructure development is expected to extend deep into the 2030s. Concurrently, Goolsbee observed that it seems anecdotally as though everyone is attempting to hire an electrician simultaneously, a situation that risks pushing rates upward.
The danger with that is nobody ever was under the impression that [inflation] just goes away on its own. If you get the economy overheated, the conventional wisdom is be aggressive up front to never let the economy overheat because once it gets overheated, it’s extremely painful to get rid of that kind of overheating. So I think we got to watch out in that space.
Austan Goolsbee, President of the Federal Reserve Bank of Chicago
The hotter inflation numbers have altered expectations for the Federal Open Market Committee meeting scheduled for December 8–9. Following a quarter-point rate increase in September to a target range of 3.75% to 4% and a decision to hold them steady in October, voting members are considering the appropriate velocity of tightening.
Richmond Federal Reserve President and CEO Tom Barkin said that despite persistent inflation, the longevity of consumer demand faces potential threats. He said the central bank must proceed prudently with rate increases aimed at controlling price growth so as to avoid damaging the economic expansion.
Fed funds futures indicate that the odds of interest rates reaching 4.25% to 4.5% by the January meeting stand at 60%. That represents either a single half-point rise or two quarter-point hikes. There is also a 10% chance of rates hitting 4.5% to 4.75% by that time.
Goolsbee remained uncommitted on specific rate actions. He told PBS NewsHour, before gesturing to the expansive boardroom table in Washington, “I will say, it’s literally the biggest table I’ve ever seen in my life in that room. So everything is always on the table, and we must get inflation back down to target and it’s going the wrong way at this point.” He said that the central bank must maintain its focus on returning inflation to its target levels despite the ongoing uncertainty surrounding future policy decisions.
What specific rate actions the central bank will take in December remains unknown.
Earlier coverage: October CPI Rose 0.4%, Boosting Odds of a Larger Fed Rate Hike
