Chicago Fed President Austan Goolsbee called October's inflation report distressing. Fed funds futures now point to a December rate hike, with the size still open.
Goolsbee spoke in an interview with PBS NewsHour on Tuesday. According to CNBC, he said the report was "another distressing report — borderline disturbing".
The consumer price index rose 0.4% on a seasonally adjusted basis in October, according to the Bureau of Labor Statistics. That was higher than economists predicted and the third straight month of outsized price increases.
Goolsbee flags tariffs and services prices
Goolsbee said he had not seen drivers of prices like tariffs fade as he had hoped. He also said continuously high services inflation concerned him.
He called the possibility that consumers and businesses begin to expect hot inflation a major concern. If that happens, he said, cooling inflation can become much more painful.
However, Goolsbee did not say whether the Fed should hike in December. He said he is not a fan of being very specific and tying the Fed's hands at the next meeting or meetings.
Waller and Logan push for firmer action
Other Fed officials spoke on Tuesday as well. Governor Christopher Waller said in London that a hot report could push him to advocate a half-point increase in December, and that 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 is what happened.
Dallas Fed President Lorie Logan said she sees a need for two additional quarter-point increases. The Fed raised rates by a quarter point in September, to a range of 3.75%-4%, before holding them steady in October.
Futures price a December hike
After the report and the officials' remarks, Fed funds futures are unanimously expecting a rate hike in December, according to CME's FedWatch tool. The question now is whether it will be a quarter or a half point, and futures put the odds of a half-point move at 15%.
Futures also put the odds of rates reaching 4.25%-4.5% by the January meeting at 60%, with a 10% chance of 4.5%-4.75%.
Source: CNBC
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