Goolsbee is thrilled by low inflation readings but says Fed needs more proof that prices are easing

By Jeffry Bartash

Chicago Fed president calls May CPI a 'very good number'

A slowdown in inflation in May was a big step in the right direction, the Chicago Federal Reserve chief said Friday, but prices need to decelerate further to support a reduction in U.S. interest rates.

"That was a very good number," Austan Goolsbee said in reference to the consumer-price-index report for May. The CPI showed no increase in inflation last month, for the first time in almost two years.

The CPI was released on Wednesday morning as the Fed concluded a two-day meeting at which it left a key short-term interest rate at a 23-year high.

Fed officials want to see more inflation readings like the one in May before they can have confidence that inflation is slowing toward the central bank's 2% target.

"We've just got to see more progress," Goolsbee said at a forum in Iowa. Earlier Friday, Cleveland Fed President Loretta Mester made similar comments.

Goolsbee noted the Fed will see a lot more inflation data in the next several months that will give a clearer idea of the trend in prices.

The Fed is trying to restore the annual rate of inflation to 2%, but the rate was rising at a 2.7% pace as of April, based on the central bank's preferred gauge, the personal consumption expenditures, or PCE, index.

The central bank on Wednesday signaled it might cut interest rates only once this year. Yet Fed Chairman Jerome Powell made it clear the bank would be prepared to cut rates more aggressively if inflation resumed the downward trend that was interrupted in the first four months of 2024.

The most recent reports on consumer and wholesale prices showed inflation flattening out in May.

Goolsbee is a voting member this year of the Fed's rate-setting panel.

-Jeffry Bartash

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06-14-24 1438ET

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