I disagree. I think the temper tantrum will be thrown right here on Reddit (no different than usual) when the Fed raises rates, hopefully 50 bps, constrains the economy, unemployment goes up, and the promise to stifle AI - data center build out as the left has promised.
Someone bring me the consumer sentiment report. I want to see what it looks like in the coming months.
If there’s one truth that will always exist it’s that no matter what happens you can safely bet Reddit will be full of people who don’t understand the topic throwing tantrums.
What they don’t do well is actually follow through on the talking.
Inflation has been above the target 2% for years now. Yet the Fed has consistently done nothing, or does something way too small and way too late.
I remarked a while back that the Fed should raise rates by 1 point (or 100 basis points, or 1%, or whatever you want to call it). Their failure to do so is why things are so “distressing” and “borderline disturbing.”
But the Fed is obviously fine with it all, as long as they can talk about how concerned they are about matters.
In that respect, the Fed should just be called the Susan Collins Committee. It is full of concerns, but then votes to basically do nothing about them.
I would suspect that said rates would be unchanged, at least as to the immediately subsequent reports. But within 3 to 6 months I’d expect the inflation rate to decrease and the unemployment rate to remain the same or slightly higher.
> But within 3 to 6 months I’d expect the inflation rate to decrease and the unemployment rate to remain the same or slightly higher.
Doesn’t the DSGE output suggest a 100bps hike would reduce medium term GDP by close to 1.5%? That seems a fair bit higher than your estimates here, what are you basing this on?
I'm sure he has a model as the basis for this assertion, since he doesn't have any data to draw from in the time since the Fed started announcing rate raises in '94 and nothing historical except the Volcker years. He no doubt did some sort of analysis combining some run of 75 basis point raises and come to the conclusion that nothing bad and everything good would happen if the FED took unprecedented action to combat inflation that's 2 points too high.
It’s always volcker, there’s no bigger tell that someone is absolutely brand new to monetary economics as a whole than blind hero worship of volcker and constant suggestions that nobody has the balls to do what volcker did the second inflation ticks over target lmao.
Your post makes it seem like you’re unaware that the Fed essentially completely fixed inflation by late 2024 and was well on track to hit target until Trump got in and screwed everything up with a completely new set of crises.
Even it noted that “Inflation has been above the Fed’s 2% target for more than five years, and the pace of price increases has only picked up since the September meeting.”
Are you suggesting that the author of that article is ignorant of the truth as well?
No, those two statements are facts and they’re not the issue I had with your post, which was the opinion. That author didn’t trash the Fed’s actions over the last five years and they didn’t prescribe a one-point hike, so it doesn’t corroborate the controversial parts of your post.
I think they should have hiked at the last meeting, and probably should have started hiking earlier this year than they did. But I think your post went too far in criticizing the handling of Covid-induced inflation.
Oh, the post-Covid inflation period, when Powell kept stating that inflation was “transitory” and the Fed essentially sat on its hands until it became clear to even a mole-rat that interest rates had to increase?
Sure, the Fed hiked then, and kept hiking, but as I stated in my previous post (and which you cut off in your quote), they did “something way too small and way too late.”
Basically, I think that past several years (if not longer—Greenspan did the same..) has shown that the Fed is too timid and too cautious in changing rates.
They don’t want to make a decision until their hand is forced and prefer to just try to talk things out and hope that their messaging solves the problem, which it very seldom does.
And the longer the Fed looks impotent, the more likely it is that the Fed loses all credibility and control. Which is something that I’d rather not happen.
Have you read the research on this? Like Bernanke’s findings that the nature of inflation shifted from a supply shock to classic Philips curve demand driven inflation in very late 2021? Wouldn’t that support the Fed’s timeline of action?
How about Arias’ recent work out of the Philadelphia Fed suggesting that inflation would have behaved very similarly if the Fed had not acted at all, and that their zero interest rate era had no discernible impact on inflation?
How would you reconcile these papers with your thoughts?
>Like Bernanke’s findings that the nature of inflation shifted from a supply shock to classic Philips curve demand driven inflation in very late 2021?
Even if the 2021 price surge began with supply-chain disruptions, the Fed maintained emergency stimulus long after the economy had clearly overheated. Fed had rates pinned near zero and continued purchasing tens of billions of dollars in Treasury and MBSs every month, even as consumer demand boomed, housing got expensive, and labor shortages became acute. By treating stimulus-fueled demand as a purely temporary supply issue, the Fed ignored warnings that price pressures were broadening across the economy. Even worse, after officially acknowledging in November 2021 that inflation was no longer transitory, theys still waited another four months and continued to inject liquidity into the financial system until March 2022 before executing a modest quarter-point rate hike. The gap between recognizing the problem and tightening monetary conditions allowed inflation expectations to drift higher and forced the central bank into a far more aggressive and disruptive series of rate increases later on.
>How about Arias’ recent work out of the Philadelphia Fed suggesting that inflation would have behaved very similarly if the Fed had not acted at all, and that their zero interest rate era had no discernible impact on inflation?
I got the opposite impression from this (although I just read it and am finishing my coffee). It felt like the paper was supporting the idea that if you want to inject stimulus checks into the consumer economy, you need to offset it with more hawkish rates. Keeping rates pinned near zero during the pandemic acted like pouring gasoline on a fire.
He said that rate hikes a few months earlier in 2021 would not have stopped the very first wave of supply-driven price increases, but a more aggressive rate policy overall would have brought inflation back to normal much faster without costing the economy extra jobs.
His paper seemed more about the delay and lagging effects of the public stimulus, and that you need to offset them with higher rates. Not the idea that inflation would have behaved very similarly if the Fed had not acted at all?
Well, it's not just as simple as "raise rates to the roof" or they would have already done it.
These are intelligent people trying to juggle a bunch of conflicting requirements, all within the context of a demented baboon in the White House conducting an erratic war that constantly spikes the price of the most important input to the economy and a massive tech bubble looking for an excuse to pop.
To be fair, they only have one lever. Sometimes talking about the lever will change consumer behavior so they don’t need to use the lever. Meanwhile Congress has an entire control panel.
What rate will resolve oil supply shocks and tariff cost pass through?
Interest rates aren't magical. You can't simply reduce everything to an inverted relationship between rates and inflation. Rate hikes are particularly ineffective at dealing with supply shock driven inflation. That's assuming the dominant channels are still countercyclical with rate hikes, which will be less and less true in the US as interest income is expansionary.
Even if it worked as effectively as the textbook says, that's still not going to help much when there is little to no demand driven inflation. Stupid policies, including a pointless war, causing supply side issues are what's driving rising inflation.
Inflation-adjusted (real) U.S. retail and food service sales increased by 0.8% month-over-month and 6.3% year-over-year in recent Commerce Department / Census Bureau data.
You can tell the crowd here skews super young because we’re back to “just have a little recession guys, it’s a good thing” comments. It’s like they want the labor market to actually be as fucked as everyone here thinks it is.
Chicago Federal Reserve President Austan Goolsbee called the latest inflation data “borderline disturbing.”
“It’s another distressing report — borderline disturbing,” Goolsbee said in an interview with the PBS NewsHour Tuesday.
“We’ve got a real inflation issue on our hands that has been developing,” Goolsbee said. “We’re going to have to deal with that.”
The consumer price index rose 0.4% on a seasonally adjusted basis in October, according to the Bureau of Labor Statistics’ Tuesday morning release. That was higher than economists had predicted, and the third straight month of outsized price increases.
Goolsbee said he had not seen drivers of prices like tariffs fade over time like he had hoped. He also said continuously high inflation on services concerned him.
And the Chicago Fed chief said lofty prices are a top issue for many people he meets.
“It’s on everyone’s mind,” Goolsbee said. “It’s on business mind. It’s on nonprofits’ minds. It’s on ordinary consumers’ mind.”
Tuesday’s inflation report landed at a critical juncture for the central bankers at the Federal Reserve as they considers their next interest-rate move — and the moves they may have to make in the months ahead if the numbers continue to come in hot.
Goolsbee’s comments came on the heels of remarks from other Fed officials Tuesday who said the rate-setting Federal Open Market Committee may need to act more decisively to rein in inflation.
When it raises or lowers rates, the Fed typically moves by a quarter-percentage point. But Fed Governor Christopher Waller said in London early Tuesday that a hot inflation report could push him toward advocating for an outsized half-point increase in December, and specifically said such a hike should be on the table if core CPI, a metric that removes volatile food and energy costs, was “around 0.3.” Hours later, that’s exactly what happened.
Dallas Fed President Lorie Logan, speaking Tuesday after the inflation report, said she sees a need for two additional quarter-point increases, and said “it may be possible to move more rapidly this winter than the FOMC has moved so far this fall.”
The rate-setting committee raised rates by a quarter point in September, to a range of 3.75%-4%, before voting to hold them steady in October.
After years of higher-than-preferred price growth, Goolsbee said the possibility of consumers and businesses beginning to expect hot inflation is a “major concern.” If that does happen, he said it can make the process of cooling inflation “much more painful.”
But Goolsbee didn’t specify whether he thought the Fed should hike rates at its December policy gathering as a result of these concerns.
“I’m not a fan of being very specific and tying our hands at the next meeting or meetings in the future,” Goolsbee said.
Waller, Logan and Paulson are voting members of the FOMC this year, which means they will cast votes on whether to raise rates at the committee’s final meeting of the year in December. Goolsbee will be a voting member next year.
In the wake of the inflation report and the remarks from the various Fed officials, Fed funds futures are now unanimously expecting a rate hike at the December meeting, according to CME’s FedWatch tool.
Now the question is about whether the central bank will raise rates by a quarter or half percentage point. The Fed funds futures currently put the odds of a half-point hike at the upcoming December meeting at 15%.
Odds of rates reaching 4.25%-4.5% by the January meeting — the equivalent of either a single half-point rise or two quarter-point hikes — are now at 60%, with a 10% chance of rates hitting 4.5%-4.75% by then.
Goolsbee rules. Highly recommend his interview on Tyler Cowen’s podcast from about a year ago. Very interesting explanations on pandemic inflation and fed procedures.
I know that people have widely varying opinions about Cowen himself, but Conversations With Tyler is a genuinely excellent interview-with-smart-people podcast. His interview with Carney a few years ago was fantastic.
The only thing that matters going forward over the next 10 or 20 years is government and state policy. It’s all going to be financial repression and inflation to get rid of the debt to GDP ratio and all the western nations.
Inflation is here to stay and they want it that way
The fundamental problem is people want financial wealth as opposed to material or community wealth. Basically the house is better as a financial asset than a place to live and that notion is poisoning the economy.
My fear is higher rates make it harder for those who need access to cash to get it, while those sitting on piles of cash will just pick the bones clean
The 30-year fixed mortgage rate drops when the 10-year Treasury yield falls. The Fed's hike will slow down economic demand and lower inflation, driving the 10 year yield lower.
If the Fed hikes, the 2 year Treasury yield will rise. A higher 2 year yield and a lower 10 year yield would mean a smaller 2s10s spread and lower 30 year fixed mortgage rate.
If the Fed hikes that's going to put upward pressure on the 10 year. It won't be as closely anchored as the 2 year, but all yields are still ultimately based on the expected trajectory of the policy rate over the term.
>The Fed's hike will slow down economic demand and lower inflation, driving the 10 year yield lower.
Apply this theory to the Volcker era and you'll see that it doesn't hold up. It doesn't even hold up for the 30 year bond. The ultimate causal variable isn't inflation, it's the policy rate.
Seriously, apply the theory to the Volcker era. The greatest 'tough on inflation' policy response ever done and there are no examples of his big hikes resulting in the 10 year, or even 30 year, moving in the opposite direction. The theory is wrong.
Yes but what you’re saying is contradictory to the very basic mathematics that underpins fixed income pricing. You don’t need to wait and see, fixed income is math - a 10 year bond has a forward rate construct and an implied path of the FFR that you can derive from the curve. If that FFR path shifts upwards by a considerable margin on a whim then the yield necessarily moves upwards all other considerations held equal.
> The Fed's hike will slow down economic demand and lower inflation, driving the 10 year yield lower.
This is just completely incorrect. Please see the below lecture from Andrew Lo on term structure of rates. If you know finance you know Lo already, but for those that don’t Lo is one of the most prominent professors in Finance, having authored the paper “non random walk down Wall Street” which underpins most of our understanding of modern markets.
If rates hike again, we'll see some pretty awesome carnage in the already shakey data center loan sector. Would not want to be the people dealing with that balancing act.
yeah, but how does raising interest rates affect the price of oil due to the ill-advised war? The oil->diesel price rise is driving inflation.
giving more risk-free cash to owners of Treasury bonds will do nothing to reduce prices. it will probably raise prices on luxury goods due to rich people getting extra cash.
The Fed’s inflation challenge is becoming increasingly difficult. Three consecutive months of stronger-than-expected price increases suggest that inflationary pressures remain persistent, particularly in services. The debate is now shifting from whether rates should rise again to how aggressively the Fed may need to act in December. A 50-basis-point hike is back on the table.
[OP] TorukMaktoM | 22 hours ago
Chicago Federal Reserve President Austan Goolsbee called the latest consumer inflation report “borderline disturbing” and “distressing."
The consumer price index rose 0.4% on a seasonally adjusted basis in October, coming in higher than economists predicted.
Some Fed officials have been saying the central bank may need to be more aggressive in hiking interest rates to bring down inflation.
RLewis8888 | 21 hours ago
How long will it take for Trump to blame this on the election?
Possible-Nectarine80 | 20 hours ago
About 6 years ago. And it's been a broken record ever since.
RIP_Soulja_Slim | 22 hours ago
I personally am very much excited to read the many temper tantrums that will be thrown on truth social in the upcoming months.
chumpandchive | 22 hours ago
just bought one of those jiffy pop scary saucers for this popcorn occasion
Preme2 | 21 hours ago
I disagree. I think the temper tantrum will be thrown right here on Reddit (no different than usual) when the Fed raises rates, hopefully 50 bps, constrains the economy, unemployment goes up, and the promise to stifle AI - data center build out as the left has promised.
Someone bring me the consumer sentiment report. I want to see what it looks like in the coming months.
weatherwar | 19 hours ago
The temper tantrum about higher unemployment is 100% only going to be on reddit.
You're a bonafide genius.
RIP_Soulja_Slim | 21 hours ago
If there’s one truth that will always exist it’s that no matter what happens you can safely bet Reddit will be full of people who don’t understand the topic throwing tantrums.
BathroomMaximum1721 | 19 hours ago
Would be good for mortgage rates if Fed hiked and the 2s10s spread narrowed even more to less than 0.1%.
MurrayDakota | 19 hours ago
Fed officials talk a lot. And they do it well.
What they don’t do well is actually follow through on the talking.
Inflation has been above the target 2% for years now. Yet the Fed has consistently done nothing, or does something way too small and way too late.
I remarked a while back that the Fed should raise rates by 1 point (or 100 basis points, or 1%, or whatever you want to call it). Their failure to do so is why things are so “distressing” and “borderline disturbing.”
But the Fed is obviously fine with it all, as long as they can talk about how concerned they are about matters.
In that respect, the Fed should just be called the Susan Collins Committee. It is full of concerns, but then votes to basically do nothing about them.
Useless | 19 hours ago
If the Fed raised rates at the next meeting by 100 basis points, what would the subsequent inflation rate and unemployment rate be?
MurrayDakota | 19 hours ago
I would suspect that said rates would be unchanged, at least as to the immediately subsequent reports. But within 3 to 6 months I’d expect the inflation rate to decrease and the unemployment rate to remain the same or slightly higher.
RIP_Soulja_Slim | 16 hours ago
> But within 3 to 6 months I’d expect the inflation rate to decrease and the unemployment rate to remain the same or slightly higher.
Doesn’t the DSGE output suggest a 100bps hike would reduce medium term GDP by close to 1.5%? That seems a fair bit higher than your estimates here, what are you basing this on?
Useless | 15 hours ago
I'm sure he has a model as the basis for this assertion, since he doesn't have any data to draw from in the time since the Fed started announcing rate raises in '94 and nothing historical except the Volcker years. He no doubt did some sort of analysis combining some run of 75 basis point raises and come to the conclusion that nothing bad and everything good would happen if the FED took unprecedented action to combat inflation that's 2 points too high.
RIP_Soulja_Slim | 15 hours ago
It’s always volcker, there’s no bigger tell that someone is absolutely brand new to monetary economics as a whole than blind hero worship of volcker and constant suggestions that nobody has the balls to do what volcker did the second inflation ticks over target lmao.
Scrandon | 16 hours ago
Your post makes it seem like you’re unaware that the Fed essentially completely fixed inflation by late 2024 and was well on track to hit target until Trump got in and screwed everything up with a completely new set of crises.
>consistently done nothing
Is it ignorance?
MurrayDakota | 15 hours ago
Do you recall this CNBC article?
https://www.cnbc.com/2026/10/28/fed-interest-rate-decision-october-2026.html
Even it noted that “Inflation has been above the Fed’s 2% target for more than five years, and the pace of price increases has only picked up since the September meeting.”
Are you suggesting that the author of that article is ignorant of the truth as well?
Scrandon | 15 hours ago
No, those two statements are facts and they’re not the issue I had with your post, which was the opinion. That author didn’t trash the Fed’s actions over the last five years and they didn’t prescribe a one-point hike, so it doesn’t corroborate the controversial parts of your post.
I think they should have hiked at the last meeting, and probably should have started hiking earlier this year than they did. But I think your post went too far in criticizing the handling of Covid-induced inflation.
MurrayDakota | 15 hours ago
Oh, the post-Covid inflation period, when Powell kept stating that inflation was “transitory” and the Fed essentially sat on its hands until it became clear to even a mole-rat that interest rates had to increase?
Sure, the Fed hiked then, and kept hiking, but as I stated in my previous post (and which you cut off in your quote), they did “something way too small and way too late.”
Basically, I think that past several years (if not longer—Greenspan did the same..) has shown that the Fed is too timid and too cautious in changing rates.
They don’t want to make a decision until their hand is forced and prefer to just try to talk things out and hope that their messaging solves the problem, which it very seldom does.
And the longer the Fed looks impotent, the more likely it is that the Fed loses all credibility and control. Which is something that I’d rather not happen.
RIP_Soulja_Slim | 14 hours ago
Have you read the research on this? Like Bernanke’s findings that the nature of inflation shifted from a supply shock to classic Philips curve demand driven inflation in very late 2021? Wouldn’t that support the Fed’s timeline of action?
How about Arias’ recent work out of the Philadelphia Fed suggesting that inflation would have behaved very similarly if the Fed had not acted at all, and that their zero interest rate era had no discernible impact on inflation?
How would you reconcile these papers with your thoughts?
Were_all_dead_anyhow | 42 minutes ago
Not OP but I agree somewhat with his sentiment:
>Like Bernanke’s findings that the nature of inflation shifted from a supply shock to classic Philips curve demand driven inflation in very late 2021?
Even if the 2021 price surge began with supply-chain disruptions, the Fed maintained emergency stimulus long after the economy had clearly overheated. Fed had rates pinned near zero and continued purchasing tens of billions of dollars in Treasury and MBSs every month, even as consumer demand boomed, housing got expensive, and labor shortages became acute. By treating stimulus-fueled demand as a purely temporary supply issue, the Fed ignored warnings that price pressures were broadening across the economy. Even worse, after officially acknowledging in November 2021 that inflation was no longer transitory, theys still waited another four months and continued to inject liquidity into the financial system until March 2022 before executing a modest quarter-point rate hike. The gap between recognizing the problem and tightening monetary conditions allowed inflation expectations to drift higher and forced the central bank into a far more aggressive and disruptive series of rate increases later on.
>How about Arias’ recent work out of the Philadelphia Fed suggesting that inflation would have behaved very similarly if the Fed had not acted at all, and that their zero interest rate era had no discernible impact on inflation?
I got the opposite impression from this (although I just read it and am finishing my coffee). It felt like the paper was supporting the idea that if you want to inject stimulus checks into the consumer economy, you need to offset it with more hawkish rates. Keeping rates pinned near zero during the pandemic acted like pouring gasoline on a fire.
He said that rate hikes a few months earlier in 2021 would not have stopped the very first wave of supply-driven price increases, but a more aggressive rate policy overall would have brought inflation back to normal much faster without costing the economy extra jobs.
His paper seemed more about the delay and lagging effects of the public stimulus, and that you need to offset them with higher rates. Not the idea that inflation would have behaved very similarly if the Fed had not acted at all?
Maybe I am misreading it?
nochinzilch | 15 hours ago
How does a war increase the money supply?
BathroomMaximum1721 | 19 hours ago
Fed deserves some credit for slowing inflation by tightening financial conditions through their hawkish talk.
Mysterious_Might008 | 17 hours ago
Okay - very little credit. About 1 basis point for all the talk. Let's start hiking.
We can't keep saying inflation is "transitory". Either drive it down or stop yapping about it.
BathroomMaximum1721 | 17 hours ago
Would be good for mortgage rates if Fed hiked 50 bps and the 2s10s spread narrowed even more to less than 0.1%.
Mindless-Rooster-533 | 17 hours ago
They're basically stuck between affordability and inflation.
Qeltar_ | 17 hours ago
Well, it's not just as simple as "raise rates to the roof" or they would have already done it.
These are intelligent people trying to juggle a bunch of conflicting requirements, all within the context of a demented baboon in the White House conducting an erratic war that constantly spikes the price of the most important input to the economy and a massive tech bubble looking for an excuse to pop.
understanding_is_key | 11 hours ago
To be fair, they only have one lever. Sometimes talking about the lever will change consumer behavior so they don’t need to use the lever. Meanwhile Congress has an entire control panel.
weatherwar | 19 hours ago
Sounds like you're just hawkish. The Fed has multiple people like you.
And it has multiple people who are dovish. In the end they balance each other out - which just means changes are made slowly.
Saying the Fed is "fine with it" is obviously not true. There's a reason rates are the highest in 20 years right now.
MurrayDakota | 19 hours ago
If the Fed wasn’t fine with how things have been over each of the past five years then the Fed would have taken the necessary actions to fix things.
They haven’t.
It doesn’t matter what they say; what matters is what they do.
mistressbitcoin | 16 hours ago
2% v 3% or 3.5% isnt that horrible of a doomsday scenario.
weatherwar | 19 hours ago
What are the necessary actions to fix things in your mind?
MurrayDakota | 18 hours ago
Increase the federal funds rate.
AnUnmetPlayer | 17 hours ago
What rate will resolve oil supply shocks and tariff cost pass through?
Interest rates aren't magical. You can't simply reduce everything to an inverted relationship between rates and inflation. Rate hikes are particularly ineffective at dealing with supply shock driven inflation. That's assuming the dominant channels are still countercyclical with rate hikes, which will be less and less true in the US as interest income is expansionary.
BathroomMaximum1721 | 16 hours ago
Economic slowdown (demand driven) related inflation will go down even if supply shock driven component doesn't, if the Fed hikes especially by 50 bps.
AnUnmetPlayer | 16 hours ago
Even if it worked as effectively as the textbook says, that's still not going to help much when there is little to no demand driven inflation. Stupid policies, including a pointless war, causing supply side issues are what's driving rising inflation.
BathroomMaximum1721 | 15 hours ago
Inflation-adjusted (real) U.S. retail and food service sales increased by 0.8% month-over-month and 6.3% year-over-year in recent Commerce Department / Census Bureau data.
weatherwar | 18 hours ago
Since their inaction have already done that, to what number do you believe they should increase it to?
MurrayDakota | 18 hours ago
Pretty sure that I’ve already suggested/implied this, but the target range for the Fed funds rate should be raised to 4.75% to 5.0%.
BathroomMaximum1721 | 16 hours ago
4.25 to 4.5% will lower the 10 year yield to 4.6 to 4.7%. Hopefully the curve doesn't invert and push the 10 year yield lower than 4.5%.
weatherwar | 18 hours ago
And that would solve inflation?
MurrayDakota | 18 hours ago
Considering that some inflation is generally desired, no, such a rate would not “solve” inflation.
I do think that such a rate would help to reduce the current rate of inflation though.
devliegende | 18 hours ago
A recession likely would have caused much more harm than the little bit of extra inflation did
Meet_James_Ensor | 15 hours ago
This is our concern Dude
RIP_Soulja_Slim | 13 hours ago
You can tell the crowd here skews super young because we’re back to “just have a little recession guys, it’s a good thing” comments. It’s like they want the labor market to actually be as fucked as everyone here thinks it is.
[OP] TorukMaktoM | 21 hours ago
Chicago Federal Reserve President Austan Goolsbee called the latest inflation data “borderline disturbing.”
“It’s another distressing report — borderline disturbing,” Goolsbee said in an interview with the PBS NewsHour Tuesday.
“We’ve got a real inflation issue on our hands that has been developing,” Goolsbee said. “We’re going to have to deal with that.”
The consumer price index rose 0.4% on a seasonally adjusted basis in October, according to the Bureau of Labor Statistics’ Tuesday morning release. That was higher than economists had predicted, and the third straight month of outsized price increases.
Goolsbee said he had not seen drivers of prices like tariffs fade over time like he had hoped. He also said continuously high inflation on services concerned him.
And the Chicago Fed chief said lofty prices are a top issue for many people he meets.
“It’s on everyone’s mind,” Goolsbee said. “It’s on business mind. It’s on nonprofits’ minds. It’s on ordinary consumers’ mind.”
Tuesday’s inflation report landed at a critical juncture for the central bankers at the Federal Reserve as they considers their next interest-rate move — and the moves they may have to make in the months ahead if the numbers continue to come in hot.
Goolsbee’s comments came on the heels of remarks from other Fed officials Tuesday who said the rate-setting Federal Open Market Committee may need to act more decisively to rein in inflation.
When it raises or lowers rates, the Fed typically moves by a quarter-percentage point. But Fed Governor Christopher Waller said in London early Tuesday that a hot inflation report could push him toward advocating for an outsized half-point increase in December, and specifically said such a hike should be on the table if core CPI, a metric that removes volatile food and energy costs, was “around 0.3.” Hours later, that’s exactly what happened.
Dallas Fed President Lorie Logan, speaking Tuesday after the inflation report, said she sees a need for two additional quarter-point increases, and said “it may be possible to move more rapidly this winter than the FOMC has moved so far this fall.”
The rate-setting committee raised rates by a quarter point in September, to a range of 3.75%-4%, before voting to hold them steady in October.
After years of higher-than-preferred price growth, Goolsbee said the possibility of consumers and businesses beginning to expect hot inflation is a “major concern.” If that does happen, he said it can make the process of cooling inflation “much more painful.”
But Goolsbee didn’t specify whether he thought the Fed should hike rates at its December policy gathering as a result of these concerns.
“I’m not a fan of being very specific and tying our hands at the next meeting or meetings in the future,” Goolsbee said.
Waller, Logan and Paulson are voting members of the FOMC this year, which means they will cast votes on whether to raise rates at the committee’s final meeting of the year in December. Goolsbee will be a voting member next year.
In the wake of the inflation report and the remarks from the various Fed officials, Fed funds futures are now unanimously expecting a rate hike at the December meeting, according to CME’s FedWatch tool.
Now the question is about whether the central bank will raise rates by a quarter or half percentage point. The Fed funds futures currently put the odds of a half-point hike at the upcoming December meeting at 15%.
Odds of rates reaching 4.25%-4.5% by the January meeting — the equivalent of either a single half-point rise or two quarter-point hikes — are now at 60%, with a 10% chance of rates hitting 4.5%-4.75% by then.
BathroomMaximum1721 | 19 hours ago
Would be good for mortgage rates if Fed hiked 50 bps and the 2s10s spread narrowed even more to less than 0.1%.
Fun_Word_7325 | 14 hours ago
How’s that work? What’s 2s10s?
BathroomMaximum1721 | 10 hours ago
The 2s10s spread is the difference between the 10-year U.S. Treasury yield and the 2-year U.S. Treasury yield.
The Fed's hike will slow down demand and economic activity and lower inflation, driving the 10 year yield lower.
If the Fed hikes, the 2 year Treasury yield will rise. A higher 2 year yield and a lower 10 year yield would mean a smaller 2s10s spread.
Fun_Word_7325 | 10 hours ago
For a novice, what does a smaller spread between 2 year and 10 year bond mean?
BathroomMaximum1721 | 9 hours ago
Means economic growth and inflation are about to slow.
onlyfortheholidays | 19 hours ago
Goolsbee rules. Highly recommend his interview on Tyler Cowen’s podcast from about a year ago. Very interesting explanations on pandemic inflation and fed procedures.
mcsul | 18 hours ago
I know that people have widely varying opinions about Cowen himself, but Conversations With Tyler is a genuinely excellent interview-with-smart-people podcast. His interview with Carney a few years ago was fantastic.
Dripdry42 | 19 hours ago
The only thing that matters going forward over the next 10 or 20 years is government and state policy. It’s all going to be financial repression and inflation to get rid of the debt to GDP ratio and all the western nations.
Inflation is here to stay and they want it that way
Richandler | 17 hours ago
The fundamental problem is people want financial wealth as opposed to material or community wealth. Basically the house is better as a financial asset than a place to live and that notion is poisoning the economy.
CapitalistCabal | 13 hours ago
I’m not sure what gave you the impression that the politicians leading “Western nations” have any kind of long term strategy.
IKillZombies4Cash | 19 hours ago
My fear is higher rates make it harder for those who need access to cash to get it, while those sitting on piles of cash will just pick the bones clean
CapitalistCabal | 13 hours ago
Letting inflation rip helps no one.
The best thing to do is go hard on raising rates to crush inflation as quickly as possible.
obsequiousaardvark | 16 hours ago
Fears based on accumulated evidence usually are pretty valid to have you know.
BathroomMaximum1721 | 21 hours ago
The U.S. 10-Year minus 2-Year Treasury Yield Spread (2s10s spread) is currently sitting at 0.25% (25 basis points).
Would be good for mortgage rates if Fed hiked and it narrowed even more to less than 0.1%.
simplethingsoflife | 20 hours ago
Can you please ELI5?
BathroomMaximum1721 | 19 hours ago
The 30-year fixed mortgage rate drops when the 10-year Treasury yield falls. The Fed's hike will slow down economic demand and lower inflation, driving the 10 year yield lower.
If the Fed hikes, the 2 year Treasury yield will rise. A higher 2 year yield and a lower 10 year yield would mean a smaller 2s10s spread and lower 30 year fixed mortgage rate.
AnUnmetPlayer | 16 hours ago
If the Fed hikes that's going to put upward pressure on the 10 year. It won't be as closely anchored as the 2 year, but all yields are still ultimately based on the expected trajectory of the policy rate over the term.
>The Fed's hike will slow down economic demand and lower inflation, driving the 10 year yield lower.
Apply this theory to the Volcker era and you'll see that it doesn't hold up. It doesn't even hold up for the 30 year bond. The ultimate causal variable isn't inflation, it's the policy rate.
BathroomMaximum1721 | 16 hours ago
Let's see what happens to the 10 year yield if the Fed hikes 50 bps in Dec.
AnUnmetPlayer | 16 hours ago
It would go up, especially because that would be a surprise given the current estimated 87% odds of only a 25 point hike.
Seriously, apply the theory to the Volcker era. The greatest 'tough on inflation' policy response ever done and there are no examples of his big hikes resulting in the 10 year, or even 30 year, moving in the opposite direction. The theory is wrong.
BathroomMaximum1721 | 15 hours ago
We both are saying opposite things. Let’s wait and see.
RIP_Soulja_Slim | 15 hours ago
Yes but what you’re saying is contradictory to the very basic mathematics that underpins fixed income pricing. You don’t need to wait and see, fixed income is math - a 10 year bond has a forward rate construct and an implied path of the FFR that you can derive from the curve. If that FFR path shifts upwards by a considerable margin on a whim then the yield necessarily moves upwards all other considerations held equal.
BathroomMaximum1721 | 10 hours ago
https://www.cmegroup.com/videos/2026/09/17/u-s-10-year-treasury-yield-reverses-below-5-following-fed-rate.html
RIP_Soulja_Slim | 10 hours ago
Yes, this is in line with interest constructs and theory, what you said was opposed to it, what details would you like explained?
simplethingsoflife | 18 hours ago
Thank you!
RIP_Soulja_Slim | 14 hours ago
> The Fed's hike will slow down economic demand and lower inflation, driving the 10 year yield lower.
This is just completely incorrect. Please see the below lecture from Andrew Lo on term structure of rates. If you know finance you know Lo already, but for those that don’t Lo is one of the most prominent professors in Finance, having authored the paper “non random walk down Wall Street” which underpins most of our understanding of modern markets.
https://ocw.mit.edu/courses/15-401-finance-theory-i-fall-2008/resources/part-ii-of-fixed-income-securities/
IAmNotMoki | 16 hours ago
If rates hike again, we'll see some pretty awesome carnage in the already shakey data center loan sector. Would not want to be the people dealing with that balancing act.
liegelord | 12 hours ago
yeah, but how does raising interest rates affect the price of oil due to the ill-advised war? The oil->diesel price rise is driving inflation.
giving more risk-free cash to owners of Treasury bonds will do nothing to reduce prices. it will probably raise prices on luxury goods due to rich people getting extra cash.
Low_Ability4450 | 3 hours ago
The Fed’s inflation challenge is becoming increasingly difficult. Three consecutive months of stronger-than-expected price increases suggest that inflationary pressures remain persistent, particularly in services. The debate is now shifting from whether rates should rise again to how aggressively the Fed may need to act in December. A 50-basis-point hike is back on the table.