Goolsbee warns stalled services inflation could be spreading
The Chicago Fed president sharpens his earlier warning, days after other officials pulled long-dated yields off a 24-year high
Published
Austan Goolsbee said low progress on services inflation may be a sign that it is spreading, a step beyond his remark two days ago that inflation is going the wrong way.
The comment pushes further than his earlier one. Then, he said progress had stalled. Now he is raising a more specific worry: that sticky services prices could bleed into broader inflation rather than stay contained.
The timing matters. On Thursday the 10-year Treasury yield fell to 5.24% and the two-year dropped to 4.79%, as Fed officials Philip Jefferson and John Williams signaled no urgency on further rate hikes. Traders had put the odds of another hike in October at 50-50. That followed Fed Governor Lorie Logan's call for more rate hikes as inflation lingers, and Neel Kashkari's comment that September's hike showed the Fed's resolve.
If Goolsbee's spread framing takes hold among hawks, it reopens the case for tightening at a moment when traders had just settled near even odds on an October move. That would widen the gap between what the Fed is saying and what markets are pricing, a gap the next inflation data will have to resolve.