Fed Holds Off on Rate Cuts While Inflation Sticks Above Target

The Chicago Federal Reserve chief, Austan Goolsbee, cautioned at a Washington conference that cutting interest rates now would be premature because inflation still lingers above the 2 % target. He warned that past mistakes of assuming price rises were temporary should not be repeated.

• Core inflation: 3 % in December, up 0.2 percentage points from November.
• Tariffs: May have nudged the number up, but deeper pressures in services and housing keep it high.
• Message: “3 % is not good enough.” The Fed must stay vigilant and not rush to lower rates before inflation shows a clear path back to the target.

Market expectations suggest that the Fed will keep rates steady until at least June, with a possible cut in July. The central bank has already lowered rates three times in late 2025, but the next move will depend on how quickly inflation falls.

Other Fed officials echoed a cautious tone:

• Governor Christopher Waller: While tariffs should be considered, the labor market looks stronger than some data suggest, reducing pressure for cuts. He remains skeptical that recent employment numbers are decisive.
• Governor Lisa Cook: Will speak later in the morning as officials weigh the balance between inflation control and economic growth.