A Federal Reserve official on Aug. 13 said he’s more concerned about last month’s rise in underlying inflation than an unusually weak jobs report, hinting he may not be inclined to support an interest rate cut in September as many economists expect.
“If we start getting more reports like the latest one on overall inflation… that would be more concerning,” Austan Goolsbee, president of the Federal Reserve Bank of Chicago and a voting member of the Fed’s interest rate setting committee, said at a forum by the Greater Springfield Chamber of Commerce in Illinois.
Goolsbee’s remarks are noteworthy because he’s generally considered one of the more “dovish” members of the Fed’s rate setting committee. That means he may be more inclined than others to reduce rates to head off a recession then raise rates or keep them higher for longer to bring down inflation.
His views appear to conflict with those of many economists and investors, who viewed the July jobs report as dismal and the inflation reading as relatively mild. Earlier Wednesday, Fed futures markets figured there was a nearly 100% chance of a September rate cut.
Like many Fed officials, Goolsbee has favored holding off on rate cuts until the Fed can assess the affects of President Donald Trump’s tariffs on consumer prices.
At a news conference that followed the chamber event, Goolsbee said, “The most concerning thing in the (inflation) report was services.”
Underlying services prices rose sharply because of increases in categories such as airfares and dental services. Goolsbee said he was worried about the reading because it reflected a potentially persistent trend, rather than a one-time bump from tariffs.
He said he’s also worried about Trump’s plans to impose a 100% tariff on semiconductors, which could affect a wide range of technology products and ripple through the economy in a more sustainable way.
Overall inflation held steady at 2.7% in July but a core measure that strips out volatile food and energy items rose from 2.9% to 3.1%, reflecting the rise in services price, according to the consumer price index, released Aug. 12.
At the same time, Goolsbee also said he wasn’t worried about the disappointing 73,000 jobs U.S. employers added in July and the downward revision of 258,000 jobs for the previous two months. The numbers left employment growth averaging an anemic 35,000 the past three months.
But Goolsbee said Trump’s immigration crackdown likely has affected population growth and the jobs numbers, but that doesn’t mean the labor market has substantially weakened. He noted job opening and hiring rates are comparable to prepandemic levels. And the unemployment rate, at 4.2%, remains historically low.
“I think it’s a bad idea to (overinterpret) from one variable,” Goolsbee told reporters. “We don’t know what the immigration flows are.”
Goolsbee also said at the chamber event, “The state of the labor market is pretty strong, pretty solid.”
He said he wasn’t ruling out a September rate cut, noting Fed officials will review the August inflation and jobs reports before making a decision at a mid-September meeting.
“It depends on what the numbers show,” he said, adding he hasn’t made a decision. “I consider all the meetings the Fed has to be live meetings.”
(This story has been updated with new information.)
This article originally appeared on USA TODAY: What Fed’s Goolsbee said about a September interest rate cut