How services inflation can be a ‘danger sign’: Fed’s Goolsbee

Yahoo Finance Video

Sat, February 14, 2026 at 6:30 AM GMT+9

Federal Reserve Bank of Chicago President Austan Goolsbee sits down with Yahoo Finance Senior Fed Reporter Jennifer Schonberger to talk about his outlook on the latest inflation and what it may mean for interest rates.

Also catch Yahoo Finance’s full interview with Austan Goolsbee.

To watch more expert insights and analysis on the latest market action, check out more Market Domination.

Video Transcript

00:00 Speaker A

Sounds like you still have some concerns on inflation as we talked about at the top of this interview. And last year, you said you were wary about front loading too many rate cuts for kind of making the conclusion that inflation was going to be transtory. And in December, you dissented against cutting rates because you wanted to have more time to wait to see the data, the job market, the economy. Now that you do have more data, do you think that three rate cuts last year was the right thing to do? Is the Fed funds rate restricting the economy at this point?

00:45 Speaker B

Well, I I don’t know on the on the last part, I don’t know how restricted we are. Inflation’s been above the target for more than four and a half years now. And we need to see improvement in inflation, not just count on that it will improve on its own before we start making the rate cuts in my view.

01:20 Speaker B

Now, I still expect that we will see the progress. I’m still want and believe that the tariff part will impact the price level, but that we can see progress and and that inflation come down.

01:40 Speaker B

I’m still wary though. As I say, if you look at even the inflation numbers that we’ve just gotten, Services inflation is not tamed in the CPI. We’ll have to see what the services look like when we get the PP

02:00 Speaker B

BI inflation next week, but that is a category that’s not supposed to be being driven by tariffs. The the tariffable content of services is very low. So, if you see inflation well above the target in services, that’s a danger sign and I just want to get some more more information before we start frontloading the cuts.

02:32 Speaker B

That third cut, I voted for the first two of the cuts. The thing about the third one was, the government was shut down and we weren’t even getting any information. So I still think that it would have been wiser to to wait.

02:48 Speaker A

How far from neutral are you at this point? You said you’re not sure how much the Fed funds rate is restricting the economy and is it safe to say that you voted in favor of holding rates steady in January?

03:10 Speaker B

Well, I wasn’t a voter uh in in January. The the issue that we’re facing, if you look at the restrictiveness is what matters is the real rate, the rate minus inflation. So, if inflation remains elevated at 3% or even above that. If you looked at core inflation, the new month that that just came in is an annualized rate of 3.6% for core inflation. If inflation is 3% or above, then the level of real rate restrictiveness is not high. is somewhere close to what people think is the long run real interest rate uh that that is neutral, the so-called R star. So, I think let’s just be a little circumspect, making pronouncements about where rates are going to settle until we’re clear that the inflation rate is settling back at 2%. If we’re at an inflation rate of 2%, then as I say, I think rates can go down more, even several cuts more from where they are today. But that’s conditional on getting inflation back on path to 2%, which right now, we are not on a path back to 2%. We’re kind of stuck at 3% and that’s not acceptable.

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