Chicago Federal Reserve President Austan Goolsbee said inflation remains the central bank's biggest concern despite some improvement in services prices as policymakers continue to assess the impact of elevated energy costs on the U.S. economy.
The remarks came after fresh inflation data reflected the lingering effects of higher oil prices during the recent Iran conflict, which pushed up transportation and energy costs across the economy.
Speaking in an interview from the Chicago Board Options Exchange trading floor on Thursday, Goolsbee said recent data offered "a little bit of improvement" in services inflation but stressed that overall inflation remains above the Federal Reserve's comfort level, CNBC reported.
"You have seen now little bit of improvement on this services inflation, and I've been identifying that as something that we would want to see," Goolsbee said. "But right now, as between the two sides of the Fed's mandate, the inflation side and the job market side, clearly the problem's on the inflation side."
His comments came a day after Commerce Department data showed that the Federal Reserve's preferred inflation measure, the Personal Consumption Expenditures (PCE) price index, remained elevated in May.
Core PCE inflation, which excludes food and energy, rose 3.4% from a year earlier, its highest reading since October 2023, while headline PCE inflation reached 4.1%, driven in part by higher energy prices during the recent Middle East conflict, according to Reuters.
The May report showed services prices increased 0.5% during the month, the strongest gain since January, while goods prices rose 0.4%. Energy prices climbed 6.5%, and transportation services also accelerated as fuel costs filtered through the economy, Reuters reported.
Goolsbee declined to comment on the direction of interest rates, saying he supported Federal Reserve Chair Kevin Warsh's decision to move away from offering detailed forward guidance about future policy decisions.
"Let's streamline, let's take some forward guidance out of there. Let's not speculate about the rate path," Goolsbee said, according to CNBC.
He also rejected suggestions of divisions within the central bank under Warsh's leadership, noting that the two worked together during the global financial crisis when Warsh served at the Federal Reserve and Goolsbee was a senior economic adviser in the Obama White House.
Later Thursday, New York Federal Reserve President John Williams also reiterated that inflation remains above the Fed's 2% target but said the current policy stance remains appropriate.
"Given the elevated level of inflation, it is imperative that we restore it to our 2 percent longer-run goal on a sustained basis," Williams said during remarks prepared for the Crane Money Fund Symposium in Jersey City, New Jersey, according to Reuters. "The current stance of monetary policy is well positioned to do that."
Williams said several factors could help reduce inflationary pressure, including fading tariff effects, lower energy prices as tensions surrounding the Iran conflict ease, and moderating rent growth that could slow housing-related inflation, Reuters reported.
His latest outlook projected inflation easing to 3.5% by the end of the year before returning to the Federal Reserve's 2% objective by 2028, according to Reuters.
The officials' remarks came one week after the Federal Open Market Committee left its benchmark interest rate unchanged. Under Warsh's leadership, the central bank also shortened its post-meeting statement and removed language that had previously provided guidance on the likely path of future interest rate decisions, a shift aimed at reducing market speculation surrounding upcoming meetings, Reuters reported.
Financial markets continued to monitor incoming economic data following Thursday's inflation report. CME Group's FedWatch tool showed traders assigning roughly a 30% probability of a rate increase at the Federal Reserve's July 28-29 meeting after the latest economic releases.
Goolsbee is not a voting member of the Federal Open Market Committee this year but will regain voting rights in 2027. Williams holds a permanent vote on the policy-setting committee.
