• Chicago Fed President Austan Goolsbee says inflation progress has stalled and may be moving in the wrong direction.
  • The Fed is operating 'half-blind' due to a government shutdown that has halted official inflation data releases.
  • Recent tariff impacts and persistent services inflation are complicating the path forward for rate cuts.

Chicago Federal Reserve President Austan Goolsbee expressed deepening concern that inflation is proving more persistent than anticipated, describing recent trends as "a little unnerving" and warning that the central bank may need to proceed cautiously with any further interest rate cuts.

In multiple interviews this week, Goolsbee highlighted that inflation has stalled over the past several months, with particular strength in core and services categories that are less sensitive to traditional monetary policy tools. "We're seeing inflation going the wrong way," Goolsbee noted, pointing to recent data that shows price pressures aren't abating as quickly as hoped.

The situation is complicated by an ongoing government shutdown that has suspended the release of key economic indicators, including the Consumer Price Index and Personal Consumption Expenditures reports. This data vacuum leaves policymakers "half-blind" at a critical juncture, according to officials familiar with the matter.

Goolsbee specifically cited tariffs as a growing concern, noting that if these levies begin affecting intermediate goods—components used in production—the inflationary impact could become more widespread and persistent. "When tariffs hit intermediate goods, that's when you start to get more broad-based price pressure," he explained during a recent television appearance.

The Chicago Fed president's comments reflect a broader unease within the Federal Reserve System about whether recent inflation spikes are transitory or signal deeper structural issues. Multiple Fed officials have recently expressed caution about moving too quickly with additional rate cuts without clearer evidence that inflation is sustainably returning to the 2% target.

Market participants have taken note of the shifting tone. Fed funds futures now price in fewer rate cuts for the coming months, with traders awaiting more clarity on the inflation trajectory. The uncertainty has contributed to volatility across Treasury markets, particularly in shorter-dated securities.

Goolsbee emphasized there's no "risk-free path" for policymakers at this stage. Cutting rates too aggressively could allow inflation to become entrenched, while keeping policy too restrictive risks unnecessary economic damage. "We need to see more data," he reiterated, though acknowledged the current information void makes that challenging.

The Fed's most recent rate cut was met with dissent from some committee members, reflecting internal divisions over the appropriate policy response. Other regional Fed presidents have similarly urged patience, suggesting the central bank may be entering a prolonged pause as it assesses the evolving inflation landscape.

Attempts to reach other Fed officials for additional comment were unsuccessful late Wednesday. A spokesperson for the Federal Reserve System declined to elaborate beyond Goolsbee's published remarks.

Correction: An earlier version of this article misstated the timing of Goolsbee's most recent comments. They were made in multiple interviews throughout this week.