Chicago Fed President Austan Goolsbee warned that price growth is moving in the wrong direction, driven by both enduring supply shocks and artificial intelligence infrastructure demand. His cautionary remarks followed government data showing the producer price index accelerated to a 6.5% annual rate in October, its highest level since late 2022. Earlier reports also indicated that consumer prices climbed faster than expected during the same month. Consequently, traders are fully anticipating a 25 basis point rate increase at the December Federal Open Market Committee gathering.
Key points
The Federal Reserve faces mounting pressure to implement additional policy measures to re…: The Federal Reserve faces mounting pressure to implement additional policy measures to reestablish credibility and return inflation to its 2% target.
Emerging demand from artificial intelligence data center construction is combining with p…: Emerging demand from artificial intelligence data center construction is combining with persistent supply shocks to fuel price increases.
CME Group futures indicate there is a better than 10% chance policymakers will opt for a…: CME Group futures indicate there is a better than 10% chance policymakers will opt for a larger half-point rate increase in December.
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Chicago Federal Reserve President Austan Goolsbee expressed concern about the latest inflation data, telling CNBC on Friday that the central bank likely will need to take action.
"I believe that the the central bank has definitely got work to do to continue to reestablish its credibility," the policymaker said during an interview on "Squawk Box."
His remarks came shortly after the Bureau of Labor Statistics reported that the producer price index, considered a proxy for wholesale prices, posted a 0.3% increase in October, which was slightly less than expected, but also indicated a 6.5% annual gain, the highest since November 2022.
With data in hand earlier in the week showing that the consumer price index rose a bit more than expected during the month, Goolsbee said the Fed is slipping further away from its 2% inflation target.
"We've been above 2% for almost six years, and while it sometimes we were making progress, lately we're not making any progress, and if anything, it's going the wrong way," he said.
"Inflation is rising. It's proved far more persistent than we predicted…
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