Fed Goolsbee: There is a observe of unease from the final CPI and PPI knowledge

• Will need to see at least one more report to determine if we are still on the golden path
• There is a note of a note of unease from the last CPI and PPI data.
• Let’s not over react to one month of PPI, CPI, import prices, but an area of concern.
• We have added a lot of uncertainty with much of it coming from tariffs.
• These have not been a one-off tariff increase.
• The nightmare scenario of higher prices and falling employment is possible.
• The Fed can try to control the secondary impacts of tariffs on parts, components, supplies and intermediate goods.
• Need to figure out what part of price increases to ignore, which to respond to.
• Don’t need to hold rates forever
• If we keep getting inflation reports like we had earlier, it would be totally fine to bring rates to where they will settle.
• We were on a strong position coming into the month of April and there still is a lot of strength in the economy.
• If we get a hint for September or later in fall, that we are not in any inflationary spiral we can cut rates.
• The fact that services inflation was coming in at a rate we haven’t seen a long time, that makes me a little uneasy.
• I am hoping the services inflation was a blip.

US stocks remain mixed with the NASDAQ lower by -23 points. The Dow industrial average up by 254 points, and the S&P up 7.21 points after the data and Goolsbee comments.

US yields remain under control with the two-year down -2.4 basis points now and the 10 year down -0.1 basis points. Honestly it seems a weird reaction.

Goolsbee does not sound like he is ready for September. He points out that the inflation data this month was influenced by service inflation. That is supposed to be helping not hurting. Goods inflation may still be coming from the impact of the tariffs (importers may be eating the price increases now but may not in the future). As a result, if both goods and services prices are moving higher (perhaps in reaction to the anticipated higher goods prices), that is not a good thing. It could also increases the chance that the Fed will remain on hold in September. The market is still pricing in a greater than 90% chance of a cut of 25 basis points in September. Fed chair Powell will speak at Jackson Hole on August 22.

So the recent inflation numbers present they unanticipated issue that increases uncertainty just that much more.