Fed Goolsbee: Inflation data is “bad news,” warning that PCE at 3.5% is too high

Chicago Federal Reserve Bank President Austan Goolsbee said on May 2 on Fox News’ program “The Journal Editorial Report” that the inflation data released last week is “bad news for the Fed,” and that the Fed must remain cautious about rate cuts until inflation clearly falls. CNBC quoted Goolsbee’s interpretation: “We have to get some assurance, some confirmation that we’re moving back to our 2% inflation goal.” Previously, the year-over-year rate for the PCE price index in March was 3.5%, which is 1.5 percentage points above the Fed’s inflation target.

Goolsbee: Inflation data composition “doesn’t look good,” not just affected by the war

Goolsbee said the key reason the current inflation data is worrisome lies in its composition: the rise in inflation is not only showing up in areas affected by oil prices driven by the U.S.-Iran war, but also in services that are largely insulated from tariffs and energy prices. This means inflation pressure is broader and more structural than simply attributing it to external shocks.

He also said his concerns about inflation have intensified over the past few weeks as oil prices have risen. Goolsbee’s stance was previously seen as dovish (tending to support rate cuts), and this time’s remarks sent a clear signal of a shift toward a harder line to the market.

PCE 3.5% is too high: the gap from the inflation target widens

The Fed’s preferred core inflation gauge, the PCE price index, had a March year-over-year growth rate of 3.5%, clearly above the Fed’s long-term 2% target. Goolsbee did not rule out further rate cuts publicly, but stressed that the Fed must first see inflation clearly return downward; otherwise monetary policy needs to remain “cautious.”

The statement is consistent with the atmosphere at the end of April FOMC meeting, when “differences intensified”—there were clear divides among committee members over the persistence of inflation and the timing of rate cuts. As a voting member, Goolsbee’s change in stance will have real influence on the direction of subsequent FOMC policy after May.

Next to watch: May PCE data, June FOMC meeting

The next point to watch is the April PCE price index to be released at the end of May—if it stays at 3.5% or higher, the Fed’s rate-cut schedule may be pushed back further. Another point to watch is the update to the June FOMC meeting’s dot plot, and whether it reflects a broad downward revision to committee members’ expected number of rate cuts in 2026.

This article “Fed Goolsbee: Inflation data is ‘bad news,’ warning that PCE 3.5% is too high” first appeared on Lian News ABMedia.