Chicago Fed's Goolsbee Signals Potential for Future Rate Cuts
By John Nada·Feb 14, 2026·5 min read
Austan Goolsbee of the Chicago Fed indicates potential for rate cuts contingent on inflation progress, amidst stable growth and job markets.
Chicago Federal Reserve President Austan Goolsbee expressed a cautious stance on interest rates, indicating they could decrease significantly if inflation trends toward the Fed's 2% target. However, Goolsbee emphasized the necessity of seeing tangible progress in inflation before supporting any rate cuts, especially given the current strong economic growth and stable job market.
In a recent interview, Goolsbee pointed out that while the January Consumer Price Index showed some encouraging signs, notably a year-over-year rise of 2.4%, concerns remain about persistent inflation in services. He specifically highlighted that services inflation is not influenced by tariffs and tends to be more stable, making it a more significant concern for the Fed's monetary policy.
Goolsbee's comments underscore the delicate balance the Federal Reserve must maintain as it navigates between stimulating economic growth and controlling inflation. With a 90% probability that the Fed will keep rates steady at its next meeting, the market is closely watching for any shifts in policy that could affect overall economic conditions and investor sentiment.
Goolsbee stated on February 14, 2026, that he would like to see further progress on inflation falling to the Federal Reserve's 2% mandate before supporting another rate cut. His perspective is grounded in the observation of strong economic growth and a stable job market, which he believes are crucial indicators to consider before making any adjustments to interest rates. He remarked, "If we could get some more improvement on the inflation side, I think rates can still keep going down a fair bit more, but we just need to see the progress on inflation."
The Federal Reserve's target inflation rate is a critical benchmark for monetary policy, and Goolsbee acknowledged that while recent inflation reports have shown some positive trends, significant concerns linger. The latest reading of the Consumer Price Index (CPI) for January indicated a 2.4% rise over the prior year. Interestingly, on a "core" basis, which excludes the more volatile categories of food and energy, prices increased by 2.5%. This metric is particularly important as it provides a clearer picture of underlying inflation trends.
Despite these encouraging figures, Goolsbee remains vigilant about the persistent inflation in the services sector. He noted that while goods prices, which are often impacted by tariffs, appear to be under control, the higher inflation rates in services are more troubling. Goolsbee articulated his concerns by stating, "The more concerning part is we're still seeing pretty high services inflation, which is a thing which tends to be persistent."
The distinction between goods and services inflation is vital in understanding the broader economic landscape. Goods prices can be more susceptible to temporary shocks, such as tariffs or supply chain disruptions. In contrast, services inflation is often more stable and can reflect underlying economic conditions. Goolsbee expressed a desire to see the peak impact of tariffs on inflation diminish, suggesting that this portion of inflation may prove to be transitory. This perspective indicates a hopeful outlook that the Federal Reserve's previous actions regarding tariffs may have a diminishing effect on inflation moving forward.
Additionally, Goolsbee seemed to imply that there is room for the Fed to cut rates further before reaching what he perceives as a neutral level of interest rates. This notion of a neutral rate is significant; it is the level at which monetary policy neither stimulates nor restricts economic growth. Goolsbee candidly stated, "I don't know how restricted we are," indicating a level of uncertainty about the current interest rates' impact on the economy.
His remarks reflect a broader debate within the Federal Reserve about how to respond to inflation that has exceeded the target rate for over 4.5 years. This prolonged period of elevated inflation raises questions about the effectiveness of the Fed's previous monetary policies and the potential need for new strategies. Goolsbee emphasized the importance of seeing improvement in inflation metrics before the Fed can confidently initiate rate cuts. He stated, "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."
The market's expectations regarding interest rates are a significant factor in economic forecasting and investor behavior. Data from the CME Group on Friday indicated that investors believe there is a 90% chance the Fed will hold rates steady at the conclusion of its next policy meeting on March 18. This market sentiment reflects a cautious approach among investors, who are keenly aware of the potential consequences of shifts in monetary policy.
In the context of Goolsbee's comments and the broader economic environment, it is evident that the Federal Reserve is treading carefully. The interplay between inflation, economic growth, and interest rates is complex and requires ongoing analysis. The Fed's dual mandate to promote maximum employment and stable prices necessitates a delicate balance, particularly in an environment where inflationary pressures persist.
Goolsbee's insights highlight the challenges faced by policymakers as they navigate these economic waters. While there are signs of progress in certain areas, such as goods prices stabilizing, the persistent inflation in services remains a significant concern. The Fed's ability to respond effectively to these challenges will be crucial in shaping the economic landscape in the months to come.
As the Federal Reserve approaches its next policy meeting, all eyes will be on the economic indicators and Goolsbee's further comments. The decisions made by the Fed have far-reaching implications, influencing not only the financial markets but also the broader economy and the lives of everyday Americans. Investors and economists alike will be analyzing any signals regarding potential rate cuts, as they seek to understand the trajectory of inflation and economic growth moving forward.