Chicago Federal Reserve President Austan Goolsbee said Tuesday the latest inflation data shows "progress" on a key measure watched by the central bank, but that the Fed was not yet near its target.
"We still have a way to go," Goolsbee said during a presentation at the Detroit Economic Club.
His comments came hours after the Consumer Price Index for October showed inflation on a "core" basis, which strips out the more volatile costs of food and gas, climbed 4%, down from 4.1% the previous month. The Fed's target is 2%.
Overall consumer prices were unchanged from the prior month in October as a drop in oil prices dragged down headline inflation. They rose 3.2% over the prior year in October, a deceleration from September's 0.4% monthly increase and 3.7% annual gain in prices.
The central bank is grappling with whether to raise interest rates higher after raising rates to a range of 5.25%-5.5% over the past year and a half.
Fed officials paused their increases over the last two policy meetings. Most investors currently don't expect there to be another increase this year.
Goolsbee said in his remarks Tuesday that he thinks that inflation is coming down and can continue to come down without a recession, chalking it up to rebalancing of supply chain issues from the pandemic, the Fed’s commitment to get inflation back down to target, and higher productivity.
"Productivity has lately been accelerating after having stalled out for some time," said Goolsbee. "If sustained, this would allow the US economy to grow faster and wages to rise faster without generating higher inflation."
Whether the Fed gets to its 2% target, he said, will depend on whether housing inflation declines. Those prices have started coming down, he noted, and market measures of rent imply that over the next year housing inflation is going to come down a lot.
"We've seen the beginnings of that but that must continue for it to work," he said.
Growth and employment gains have been so strong that some argue the economy is overheating and inflation is about to roar back. But Goolsbee said blockbuster numbers don't necessarily add to inflationary pressures as supply balances out.
"My concerns aren’t so much about the economy overheating as they are about external shocks that could throw us off course," he said.
Goolsbee is watching what may happen with China’s economy, which has shown signs of weakening, as well as whether geopolitical issues in the Middle East could drive up oil prices and create a shock.
He is hopeful the Fed can pull off what he refers to the "golden path" — lower inflation without a recession.
"That's more than a soft landing. That's the softest of all the soft landings."
Read more inflation coverage:
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