• Federal Reserve Bank of Chicago President Austan Goolsbee warns inflation progress has stalled and may be reversing.
  • The Fed's October rate cut came alongside heightened concern over persistent price pressures and tariff impacts.
  • Rising market-based inflation expectations would be a "major red flag" requiring policy reassessment.

Federal Reserve Bank of Chicago President Austan Goolsbee delivered a sobering assessment of the inflation fight, stating that the decline toward the 2% target has stalled and price pressures may be moving upward again. The comments, made in recent days, point to a significant shift in the Fed's internal dialogue as new economic data challenges earlier optimism.

"The disinflationary process we were seeing seems to have hit a wall," Goolsbee said, according to people familiar with his recent remarks. He specifically pointed to recent tariff increases and stubborn services inflation as key drivers of the reversal. This assessment aligns with the Federal Open Market Committee's October statement, which noted that inflation "has moved up since earlier in the year and remains elevated."

The warning comes despite the FOMC's decision to lower the federal funds rate by 25 basis points in October, a move that reflected concerns about a weakening labor market but now appears complicated by the deteriorating inflation picture. Officials have indicated that further rate cuts would be heavily dependent on incoming data, which has since shown concerning trends.

Market participants are particularly focused on Goolsbee's warning about inflation expectations. He suggested that if market-based long-term expectations begin to rise in line with increasingly pessimistic consumer surveys—where more than 10% of respondents now expect price spikes exceeding 15% in the coming year—it would represent a "major red flag" for policymakers.

The Fed's internal models now project that tariff increases announced earlier this year will continue putting upward pressure on prices through 2026, creating a challenging backdrop for monetary policy. This has forced officials to balance competing risks between supporting employment and containing what Goolsbee characterized as inflation that appears to be "going the wrong way."

Attempts to reach Goolsbee's office for additional comment were not immediately successful. Trading in interest rate futures showed reduced expectations for additional Fed easing following the latest inflation warnings, with the probability of a December rate cut falling below 40% in afternoon trading Thursday.