Chicago Fed President: "Rising Prices Are Concerning"... Rate Hike Calls Gain Ground Within Fed

October CPI up 0.4%... Beats expectations for third straight month
Goolsbee: "AI investment boom also adds to upward pressure on prices"

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, described the recent rise in prices as "shockingly concerning." After the U.S. Consumer Price Index (CPI) for October came in above market expectations, voices within the Federal Reserve (Fed) calling for a rate hike in December are growing louder.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago. AFP-Yonhap.

In an interview with PBS NewsHour on November 10 (local time), Goolsbee called the October CPI "another concerning report," adding that "the inflation problem is getting worse, and we need to address it."

According to the U.S. Department of Labor, the October CPI rose 0.4% from the previous month, exceeding market forecasts. With the CPI growth rate surpassing market forecasts for three consecutive months, concerns are mounting that inflation may become entrenched.

Goolsbee pointed out that upward pressure on goods prices from tariffs has not eased as expected. He said the most concerning factor was that inflation in services, including medical services, was not slowing. He added that the rise in service prices did not appear to be driven primarily by temporary factors such as oil prices or tariffs.

He also voiced concern that increased investment in artificial intelligence (AI) could become a new source of inflation. Construction costs, electrical equipment prices, and prices for computers and semiconductors are rising as large-scale data centers are built, and this demand pressure could spread across the broader economy, including services.

"The labor market is relatively stable, but the inflation situation is not," Goolsbee said, warning that "if high inflation becomes entrenched in the expectations of businesses and consumers, bringing prices under control could become much more painful." However, he maintained a cautious stance on whether to raise rates in December, saying, "It is not advisable to predetermine a specific decision before future meetings."

Other Fed officials, however, voiced support for further rate hikes more explicitly. Fed Governor Christopher Waller said he supported a hike of at least 0.25 percentage points in December and that a 0.5-percentage-point hike could also be considered if core CPI came in high, at around 0.3% month over month. The core CPI growth rate released that day was 0.3%.

Lorie Logan, president of the Federal Reserve Bank of Dallas, also said the Fed needed to raise its benchmark interest rate by 0.25 percentage points twice more, adding, "We may raise rates faster this winter than we did this fall." By contrast, Anna Paulson, president of the Federal Reserve Bank of Philadelphia, called for a cautious approach, saying gradual further tightening would be appropriate.

Markets appear to be taking a December rate hike as a foregone conclusion. According to the CME FedWatch Tool, federal funds futures markets are pricing in virtually a 100% chance of a rate hike in December. Of that, the probability of a 0.5-percentage-point hike stood at 11.2%. The probability that the benchmark interest rate will reach an annual range of 4.25%-4.50% by January next year was estimated at 60%.

This content was produced with the assistance of AI translation services.