The direction of inflation has become the Federal Reserve's biggest headache, and Goolsbee left little doubt about it. Prices, he said, are "going the wrong way," and the harder question right now is figuring out how much of that pressure is fleeting and how much is here to stay.
Services inflation is the bigger worry
Part of the recent jump could come down to one-off factors that fade on their own. But the stickier, more troubling piece is services inflation, which Goolsbee described as "a little more disturbing." It is the kind of pressure that does not wash out quickly, which makes it harder to brush aside.
The latest PCE report, he said, "wasn't all negative." There were signs of some improvement on the services side. Even so, inflation is sitting well above the level the Fed wants, and the report did little to change that picture.
Core inflation "well too high"
Core inflation, which strips out the volatile items, remains "well too high" and is drifting in the wrong direction. For Goolsbee, that is enough to keep the inflation half of the Fed's mandate as the central problem facing policymakers right now.
Doubts about forward guidance
Goolsbee said he has never been fully comfortable with forward guidance and has no appetite for locking himself into forecasts that stretch years into the future. He does not, however, have a problem with the dot plot itself.
He backed the Fed Chair's task force that is weighing options around the dot plot, and he praised the push to make the Fed's policy statement cleaner and easier to read.
A warning on the AI boom
Turning to artificial intelligence, Goolsbee flagged a specific risk. If financial markets start pricing in productivity gains that have not arrived yet, and consumers begin spending today on the assumption those gains are coming, the economy could overheat.
Spending now against profits that exist only on paper is what makes him uneasy, because it could feed fresh inflationary pressure before the payoff ever materializes.
Why wages won't give early warning
He also cautioned against leaning on wages as an early signal. Pay, in his view, is not a reliable leading indicator for inflation, and prices could well start climbing before wages catch up.
