Goolsbee: Inflation Is Not on Track for 2% Target as Producer Prices Rise 6.5%
Key Facts
Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said U.S. inflation is not currently moving toward the Fed’s 2% target and that the central bank must address that. Goolsbee made the remarks in a CNBC interview, details of which were published on November 13, after taking part remotely in a conversation with Yahoo Finance Invest 2026 on November 12. “Are we on a path back to 2%? I feel like we’re not on it right now, and we have to deal with that,” he said in the interview. His comments come as producer prices posted a large annual increase, even as the monthly rise slowed in October compared with September. Goolsbee’s remarks point to a challenge for the Fed’s target from persistent inflation and the need not to ignore price pressures.
Data from the Bureau of Labor Statistics showed the producer price index for final demand rose 0.3% in October, after a 1.4% jump in September and a 0.4% increase in August. In the 12 months through October, the index climbed 6.5%, its largest annual increase since a 7.4% rise in November 2022. The core index, which excludes food and energy, rose 0.3% monthly in October, compared with a 0.7% increase in September, while its annual rise held at 5% for both months. The index for final demand excluding food, energy and trade services rose 0.5% in October, the same rate as in September, and was up 4.9% annually. The readings show slower monthly increases in some measures, while annual gains remain elevated.
An Associated Press report attributed the slowdown in wholesale inflation largely to stable energy prices, but said higher fuel prices had begun to spread to other sectors. In October, prices for electronic components rose 4.2% and prices for industrial chemicals increased 3.1%; the report linked the gains to demand from the expansion of artificial intelligence activity. Goolsbee said the construction of data centers is pushing prices higher and that inflation has become more persistent than expected when pressures were viewed as supply-side shocks. He added that “services inflation and elevated health-care costs don’t seem likely to change quickly,” warning that wages are a lagging indicator of price pressures. These signals combine the effect of stable energy prices with demand pressures and service costs.
Goolsbee said the Federal Reserve must do more to preserve its credibility and cannot turn a blind eye to inflation if demand is overheating. He added that the Fed “certainly has work to do” to maintain its credibility. In October consumer-price data, the headline index rose 0.4% after a 0.6% increase in September, while the core index advanced 0.3%, the same rate recorded in August and September. At its October 28 meeting, the Federal Open Market Committee kept the target range for interest rates at 3.75% to 4% by a 10-to-2 vote, with the two dissenting members preferring a quarter-percentage-point increase. The committee’s statement at the time said inflation remained elevated.
The inflation debate coincided with a rise in U.S. Treasury yields at the close of trading on Friday, November 13: the 10-year yield climbed to 5.15% from 5.10% at Thursday’s close, and the two-year yield rose to 4.87% from 4.86%. An Associated Press report said the two-year yield closely tracks expectations for the Fed’s next move and that consumer-price inflation remained well above the bank’s 2% target. In a speech on November 10, Fed Governor Christopher Waller said he would support a 25-basis-point increase at the December meeting even if the consumer-price index reading improved, and that a larger move might be needed if the reading came in far above his expectations. The report said economists widely expect an interest-rate increase at the December meeting, with another increase possible in January. November producer-price data are scheduled for release on December 15 at 08:30 a.m. Eastern time.