Chicago Fed President Austan Goolsbee tells Yahoo Finance's Jennifer Schonberger that September's hotter-than-expected inflation report was discouraging, with services inflation showing little sign of improvement. Goolsbee says business contacts across the Midwest point to demand-side overheating rather than just a supply shock, and that if core inflation keeps running at this pace, that's totally unacceptable. He explains why he won't give forward guidance on rate hikes, why inflation hasn't proved transitory, how hype around AI's future bounty could fuel short-run overheating through data ce...
What Austan Goolsbee said
Written from the verified transcript and checked against it. Every figure links to the moment it was said.
Austan Goolsbee, president of the Chicago Federal Reserve, called September's inflation report discouraging, noting services inflation above 5% and core inflation above 4% monthly, which he said cannot be attributed to tariffs or oil. He expressed concern about demand-side overheating, citing strong consumer spending, GDP growth, and AI data center investment. Goolsbee said the Fed must prevent overheating buildup and get inflation back to the 2% target, but declined to give forward guidance on rate hikes, saying more data is needed. He acknowledged uncertainty about whether current rates are high enough. On AI, he said the buildout is competing for resources like electricians and construction, potentially shoving down other sectors, and warned that hype about future AI bounty could fuel short-run overheating. Regarding long-term bond yields at quarter-century highs, he said several months of data are needed to determine what is driving them, citing factors like hyperscaler debt, fiscal positions, and AI capital demand.
Key takeaways
Goolsbee called September's inflation report discouraging, with services inflation above 5% and core inflation above 4% monthly.
He said the Fed must prevent demand-side overheating and get inflation back to the 2% target, but gave no forward guidance on rate hikes.
Goolsbee said AI data center buildout is competing for resources like electricians and construction, potentially overheating the economy.
Goolsbee said he was uncomfortable with front-loading rate cuts premised on inflation being transitory.
0:11Your take on this morning's report and how is it informing your view of inflation?
1:42What have you been hearing from your contacts on the ground?
3:28How are you viewing the policy response that is needed given what you have laid out on the inflation front?
7:41The question was, you know that I won't give forward guidance, but what's the forward guidance?
10:16What impact would that have on economic growth?
12:38Do you think this is just a blip that's going to pass once inflation comes back down, once oil prices come back down, or do you think they're going to be sustained at these higher levels?
I'm joined now by Austan Goolsbee, president of the Chicago Federal Reserve. Austan, thank you so much for joining me. It is great to have you on the program today.
Today, we had a hotter reading on inflation for the month of September. Core prices heated up. Some said that signified that inflation is broadening out. Your take on this morning's report and how is it informing your view of inflation?
Well, I found it discouraging, and to pile on, last month was also discouraging. I'm a little nervous — not nervous, but I have concerns related to not just the overall number, but if you break out the components, services inflation shows little sign of improvement. This month's reading over 5% for services inflation, and you can't really attribute services inflation to tariffs, to oil prices, or things like that.
I'd say continued observation that the AI data center buildout and the potential for overheating in the economy coming from the excitement about the bounty to come in the future — all of those concerns remain front of mind when you get reports like this. Though you don't want to overstate the importance of any one data report, especially on inflation, because they are noisy.
How much of inflation do you think is being driven by demand versus some of those supply factors that you sort of mentioned? What have you been hearing from your contacts on the ground?
Well, on the ground here in the Midwest, everywhere we're going, we're hearing about cost and we're hearing about prices. There's very little that we're hearing that sounds like downturn, risks of recession, and things like that. So that makes you more nervous about demand-side overheating than just a straight supply shock. I would say the fact that core inflation for the month here is coming in above 4% — that's not a great sign because again, that tends not to be the immediate result of something like the oil price increase.
The part of the inflation that's coming from energy prices, we kind of understood that that was going to happen, and hopefully that will fade quickly. But you've still got goods inflation running at an over 3% pace for the month. Again, that's the part that's supposed to have been going away if the tariffs are not going to end up being a more persistent inflation shock. So the economy has got work to do on the inflation side of the mandate, let's call it, and we continue to be grappling. That's clearly the worst part of the economy is prices and costs, and we hear that everywhere we're going now out in the field.
In September, you said that you had gotten the sense from your contacts at the time that inflation was being driven in part by demand. You sort of alluded to that in your last answer as well. And you said that if that was the case, that more aggressive, front-loaded rate hikes would be necessary. How are you viewing the policy response that is needed given what you have laid out on the inflation front?
Well, look, Jennifer, you know, I'm not — even before the chairman expressed that he didn't like forward guidance, I've never been a fan of telegraphing before there are meetings and before you have all the data what we're going to do at the next meeting with rates or things like that. What I've been saying for some time and reiterated last month is there is no ambiguity. If you have a solid and steady real economy and you have inflation that is above the target and going the wrong way, if you have a one-sided violation of the legal mandate of the Fed and you don't have an employment problem and you do have an inflation problem, there's not ambiguity about how the central bank has to deal with that. You must prevent the buildup of overheating because if you get overheating buildup on the demand side, that tends to be very persistent and hard to get rid of, and it tends to roll into inflation expectations, etc.
Now, it doesn't automatically mean that one month or two months of disappointing inflation numbers — that doesn't have to mean that that's where we are. And at the last FOMC meeting, when we put out the dot plots — we don't coordinate on the dot plots — I learned that I'm one of the more optimistic folks sitting around the table about next year, what progress we could make. But you will note that I've been saying for a substantial period of time now I was uncomfortable with front-loading rate cuts and just premising that on the assumption that inflation was going to be transitory and go away. And now we see again this month more evidence that it hasn't been transitory. It hasn't come down as fast as it was forecast to come down. Part of that is because of continued shocks coming from the war, but part of that is the impact of tariffs on prices has proved more lasting than some forecasters believed to start with. And we've got this services inflation, high and persistent component that we're going to need to keep a close eye on because that's not really coming from supply shocks.
Goolsbee, A. (2026, October 14). Why bond yields hit quarter-century highs, according to the Fed's Austan Goolsbee [Interview transcript]. Yahoo Finance. CEOInterviews.AI. https://ceointerviews.ai/interview/3062188/
MLA
Austan Goolsbee. "Why bond yields hit quarter-century highs, according to the Fed's Austan Goolsbee." Yahoo Finance, 14 Oct. 2026. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/3062188/.
BibTeX
@misc{goolsbee2026_3062188,
author = {Austan Goolsbee},
title = {Why bond yields hit quarter-century highs, according to the Fed's Austan Goolsbee},
howpublished = {Interview transcript, Yahoo Finance. CEOInterviews.AI},
year = {2026},
month = {oct},
url = {https://ceointerviews.ai/interview/3062188/},
note = {Speaker-attributed transcript with timestamps}
}
