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(Bloomberg) — Federal Reserve Bank of Chicago President Austan Goolsbee said he remains concerned about inflation and questioned whether all the factors driving prices up are temporary.
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“We’ve been dealing with an inflation problem that’s well above the target and has been going the wrong way,” Goolsbee said Monday in an interview on American Public Media’s Marketplace radio program.
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Policymakers left interest rates unchanged last week but projections released following their meeting showed nearly half expect at least one rate hike will be necessary this year. Inflation, which hasn’t been at the Fed’s 2% target in more than five years, increased in the past few months, fanning concern among Fed officials that leaving interest rates where they are won’t fully cool price pressures.
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Inflation accelerated in May to the fastest pace in more than three years as the war in Iran drove up energy costs and eroded Americans’ pay gains.
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Goolsbee said that it’s critical that the Fed now assess whether temporary shocks, like tariffs or the energy-price surge from the war in Iran, are the only factors pushing up inflation. He called a rise in services prices, which isn’t related to those shocks, “disturbing” and said pressures there can often be more persistent.
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Last week’s meeting of the Federal Open Market Committee was the first for Kevin Warsh, who was sworn in as chairman in May. The Fed chief has said he wants to reform the institution and announced five task forces in key areas of monetary policy, including communications and the balance sheet.
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Goolsbee said that he’s sympathetic to Warsh’s view that the central bank shouldn’t be giving too much guidance on what policymakers are likely to do with interest rates in the future. Incorrect predictions about the future path of the economy can hurt the central bank’s credibility, Goolsbee added.
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