Chicago Fed president Goolsbee says inflation on track to reach 2% goal

Talia Soglin, Chicago Tribune on

Published in Business News

Chicago Fed president Austan Goolsbee said Friday that inflation is on track to slow to the central bank’s goal of 2%.

Speaking at the regional bank’s annual economic outlook symposium, Goolsbee said the latest inflation data — which showed consumer prices flattened between September and October — was “absolutely what we wanted it to be.”

Prices were up 3.2% in October over the year prior, a significant cooling from a high of 9.1% in June 2022, according to the Bureau of Labor Statistics. Job growth slowed but unemployment stayed low at 3.9%.

In conversation with Leslie McGranahan, senior vice president of regional analysis and community development at the Federal Reserve Bank of Chicago, Goolsbee said he had his eye on housing prices when looking toward the path to 2% inflation.

Home sale prices have remained stubbornly high from tight inventory as homeowners look to hold onto low mortgage rates they secured during the pandemic housing frenzy. The median existing home sales price was up 3.4% in October from the year prior, according to the National Association of Realtors. The metric excludes new construction.

According to Illinois Realtors, the median price of a home in the Chicago metropolitan area was up 5.8 percent in October from the prior year.

“If housing comes down to something like what it was pre-COVID and some of the market rent variables showing inflation grow even less than what it was before COVID,” Goolsbee said, “we would be on path to get to 2%.”

Goolsbee cautioned that if housing inflation does not come down, the Fed’s mandate requires it to take action. The Fed began a series of aggressive rate hikes last year to fight inflation but has pulled back in recent months, opting not to raise its key short-term interest rate in November for the second consecutive time.

Goolsbee attributed the moderation in inflation to positive developments in supply chain and labor force participation as well as public confidence in the Fed’s mandate.


“When the Fed said we’re going to do whatever we need to do to get back to target, fundamentally the market believed that,” he said.

External shocks, such as an economic meltdown in China or an extended government shutdown, could still threaten the Fed’s progress heading into next year, Goolsbee cautioned.

“Our Midwest thing is there’s no bad weather, there’s only bad clothing,” he said. “If the external shocks come, then we’ll figure that out.”

Asked about the disjoint between economic perceptions and reality, Goolsbee said the gap between the two had “never been bigger.”

Goolsbee argued the connection between consumer sentiment and consumer spending had broken down, as had the relationship between business sentiment and business investment.

Economic observers have noted a sometimes significant disconnect between people’s perception of the economy — which has veered negative — and actual economic indicators. Consumer sentiment did rise in November after declining for three consecutive months, according to the Conference Board, a business research group.

“While it’s intriguing how big this discrepancy has been,” Goolsbee said, “it also maybe matters less than it did before.”

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