- Goolsbee is alarmed. Chicago Fed President Austan Goolsbee called October’s consumer price report “another distressing report, borderline disturbing” in a PBS Newshour interview on Tuesday, saying he had expected tariffs and high energy prices to have faded by now and calling persistently high services inflation “perhaps the most troubling part,” Bloomberg reported.
- He will not rule out a bigger move. Asked about a larger rate increase, Goolsbee said he does not like to tie officials’ hands before a meeting but that “everything is always on the table,” adding, “We must get inflation back down to target, and it’s going the wrong way at this point.” He does not vote on rate decisions this year.
- Paulson, a voter, prefers to go slowly. Philadelphia Fed President Anna Paulson said Tuesday that “for now, further gradual tightening seems appropriate,” citing limited wage pressures and inflation expectations consistent with the 2% target, though she would “act more quickly if inflation expectations drift up, if wage pressures build or if underlying inflation moves higher,” Bloomberg reported.
- Both say inflation is not going away on its own. Paulson said underlying measures of inflation have been “stuck” between 2.5% and 3% and that elevated inflation “isn’t just about factors that will go away on their own,” pointing to tariffs, energy costs driven by the war in Iran and a surge in data center construction.
What Happened?
Bureau of Labor Statistics data released Tuesday showed core consumer prices, excluding food and energy, rose 0.3% in October from September, topping estimates for a third straight month, according to Bloomberg. Fed officials held the benchmark rate in a 3.75% to 4% range last month after a quarter-point hike in September. Fed Governor Christopher Waller warned Tuesday, before the report, that a half-point increase may be needed in December if inflation does not improve. Paulson, speaking at a Philadelphia Fed event, said “skipping a meeting is a matter of pace, not direction,” while noting the labor market has continued to strengthen.
Why It Matters?
The two comments map the debate inside the Fed: not whether to tighten further, but how fast. Goolsbee’s refusal to rule out a larger hike adds to the hawkish chorus led by Waller, while Paulson, who votes this year, is a counterweight arguing that a well-telegraphed gradual path lets households, businesses and the financial sector adjust. Her view that tariff effects are fading but that AI-driven demand and energy supply “are harder to call” suggests the inflation fight may stretch well beyond December, which matters for bond yields and rate-sensitive equities.
What’s Next?
Paulson said she is watching “isolated reports of firms considering larger wage increases to address the cost of living,” though “there’s nothing in the data to suggest this is widespread,” making wage data a key trigger for her to back faster hikes. Investors should watch whether more voting members echo Waller’s half-point case or Paulson’s gradualism before the December meeting. Further hot services inflation would likely strengthen the case Goolsbee described as “going the wrong way.”
