Chicago Federal Reserve President Austan Goolsbee said on Thursday that inflation is not trending in the correct direction. Goolsbee stated he has been uneasy with the use of forward guidance and speculation about future interest rates.

During a CNBC interview, Goolsbee said he remains focused on inflation but declined to speculate on the future direction of interest rates. He applauded Kevin Warsh's efforts to remove forward guidance from Federal Reserve communication, stating, "Let's streamline, let's take some forward guidance out of there." He added, "Let's not speculate about the rate path." Goolsbee described the removal of specific language as "healthy," saying, "I think it's healthy that we have those resets."

Goolsbee noted an improvement in services inflation. "You have seen now little bit of improvement on this services inflation, and I've been identifying that as something that we would want to see," Goolsbee said. He further commented on the Federal Reserve's dual mandate, stating, "But right now, as between the two sides of the Fed's mandate, the inflation side and the job market side, clearly the problem's on the inflation side."

The Commerce Department reported that the core personal consumption expenditures price index was 3.4% in May, the highest since October 2023. In May, goods prices rose by 0.4%, while services prices increased by 0.5%. The 0.5% increase in services prices was the largest since January. Energy prices also increased by 6.5%, and transportation services prices rose by 0.8% during May.

The Federal Open Market Committee removed forward guidance language from its post-meeting statement. Goolsbee and Warsh worked together during the global financial crisis, when Goolsbee served as a senior economic advisor in the Barack Obama White House and Warsh helped devise rescue programs.

The Federal Open Market Committee is scheduled to meet on July 28-29. Goolsbee is a nonvoting participant at Federal Open Market Committee meetings in 2024 and will have a vote in 2027. The CME Group's FedWatch tool indicates markets anticipate an approximately 30% chance of a rate hike at the July Federal Open Market Committee meeting.