CPI inflation figures were borderline disturbing, says Fed’s Goolsbee

“CPI was borderline disturbing on inflation.” That was the assessment of Chicago Federal Reserve President Austan Goolsbee in an interview on PBS Newshour early Wednesday.

Further remarks

The failure of services inflation to decline is the most troubling aspect.

The inflation problem we face is real.

Addressing it will be necessary.

Both costs and demand are driving inflation.

Interest rates do influence business investment.

My concern is that we are beginning to see prices overheating across a broad range of things.

Meanwhile, the labour market remains stable and steady.

Should inflation remain persistent, we will have to come to terms with it.

Inflation becoming embedded in expectations would be a major concern.

We must bring inflation back to target, with all options always on the table.

Dollar finds support as Goolsbee flags ‘real inflation issue,’ reinforcing hawkish Fed tone

An FXS Speechtracker score of 8/10, notably above the historical average of 6.8/10, highlighted the distinctly more hawkish tone of Fed’s Goolsbee and his increased concern over price pressures. Describing the latest CPI as “borderline disturbing,” services inflation as “not coming down,” and the situation as “a real inflation issue on our hands” points to mounting unease over persistent inflation. It also suggests a lower threshold for further tightening or an extended period of restrictive policy. His repeated concerns about overheating prices and entrenched inflation expectations, alongside the insistence that “everything is always on the table”, keep the possibility of rate rises open and offer broad support to the Dollar.

A 1.69-point rise took the FXS Fed Sentiment Index to 145.61, signalling a marked move further into hawkish territory consistent with the above-baseline FXS Speechtracker score. As the index stands well above the neutral 100 level, markets are likely to view Goolsbee’s comments as reinforcing expectations that rates will remain higher for longer. Such a backdrop typically supports the Dollar against lower-yielding currencies.