Interest rate cuts are not supported at this time! After the CPI release, Federal Reserve's Goolsbee "hawks": inflation needs to further decline

Caixin News Agency, February 14 (Editor: Bian Chun) Local time on Friday, Chicago Federal Reserve President Goolsbee stated that before supporting another rate cut, he wants to see more progress in inflation moving back toward the Federal Reserve’s 2% target.

This indicates that, under current economic conditions, Goolsbee is not supporting a rate cut at this time.

Goolsbee remains concerned about inflation, believing that the U.S. economy is currently growing strongly and the labor market is stable. Therefore, before lowering interest rates, he needs to see inflation return to the 2% level.

“If we can make some further progress in fighting inflation, I think there is still considerable room for rate cuts, but we do need to see inflation continue to improve. At the same time, we also need to see the labor market remain stable like it has over the past few months,” Goolsbee said in an interview.

Data released on Friday showed that the U.S. Consumer Price Index (CPI) for January rose at an annual rate of 2.4%, hitting a new low since May 2025, below market expectations of 2.5%. The core CPI, excluding food and energy costs, increased by 2.5% year-over-year, the lowest since March 2021, in line with expectations.

Although U.S. inflation in January was milder than market expectations, it still remains above the Federal Reserve’s 2% target.

Goolsbee stated that, despite some positive signs in Friday’s inflation report, there are also concerns. He pointed out that in areas affected by tariffs, commodity prices seem to have been controlled, but he is worried about higher inflation in the services sector, which he said “has not yet been contained” and is not driven by tariffs.

“What’s more concerning is that we still see high inflation in the services sector, and this type of inflation tends to be persistent,” Goolsbee said. “We hope we’ve already seen the peak impact of tariffs on inflation, and that this effect will ultimately prove to be temporary.”

Goolsbee hinted that there is still room for further rate cuts before reaching what he considers the neutral interest rate (a rate level that neither stimulates nor restrains economic growth).

When discussing the current interest rate level, Goolsbee said: “I’m not sure how tight current policy is. Inflation has been above the target for over four and a half years. Before starting to cut rates, we need to see tangible improvements in inflation rather than expecting it to improve on its own.”

However, after the release of January’s inflation data, traders increased their bets, believing that the Federal Reserve is likely to cut rates more than twice by 2026.

The Federal Reserve’s next meeting will be held on March 17-18. According to CME’s “FedWatch,” the probability of a 25 basis point rate cut in March is currently 9.8%, while the probability of holding rates steady is 90.2%.