Fed’s Goolsbee says declining inflation is a trend and not a ‘blip’

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The recent slowdown in inflation is a trend and not a “one-month blip,” Chicago Fed President Austan Goolsbee said Monday.

In an interview with the Financial Times, Goolsbee denied that progress had stalled on getting inflation back to the Fed’s 2% target.

In the FT interview, Goolsbee said “there is a lot saying that inflation is trending down compared with what it has been and that’s what we want.”

“It’s undeniable this is a trend. It wasn’t a one-month blip,” he said.

Headline September CPI came at 0.4%, a tick above expectations, and the annual rate held steady at 3.7%.

Economists have been more cautious about last week’s inflation data.

For instance, Douglas Porter, chief economist at BMO Capital Markets, said the main takeaway from the September consumer inflation report “was that both headline and core seem to be settling into a 4% zone.”

Goolsbee, who is a voting member of the Fed’s interest-rate committee, said he hasn’t made up his mind about a November rate rise. He said he is in the camp of Fed officials who think the Fed is close to the point where it can shift away from talking about how high to raise rates to how long that they need to be held at a restrictive level.

Traders in derivative markets see less than a 10% chance of a rate hike at the Fed’s Oct. 31-Nov. 1 meeting.

There will be a flurry of Fed speakers this week, capped off by a speech from Fed Chair Jerome Powell on Thursday. Powell’s speech will occur just before the Fed goes into a communications blackout next weekend.

Sam Bullard, senior economist at Wells Fargo, said he thinks Powell “will continue to walk the fine line between signaling a willingness to wait and not raise rates at the November FOMC meeting, though also note that if the labor market and inflation data do not cool, the FOMC would be prepared to raise rates, likely at their December meeting, if appropriate.”

The 10-year Treasury note yield
BX:TMUBMUSD10Y
rose 8 basis points to 4.71% in early trading on Monday.

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