U.S. CPI Returns to the “2 Era”! Fed’s Goolsbee “Softens Stance”: Rates Could Drop Sharply Next Year

On Thursday local time, 2025 FOMC voting member and Chicago Fed President Goolsbee said the latest inflation data is “good,” and if this trend continues, it could open the door to more rate cuts next year.

 

“My view is that the equilibrium interest rate is much lower than current levels. As long as we can achieve the goal of pulling inflation back to 2%, I think a significant rate decline by the end of next year is realistic,” Goolsbee said in an interview.

 

Goolsbee called November CPI data a “nice month” showing easing price pressures but cautioned against overinterpreting a single month’s figures.

 

U.S. Labor Department data released Thursday showed November unadjusted CPI YoY at 2.7% — below the expected 3.1%; core CPI (excluding volatile food and energy) also came in below forecast at 2.6% YoY — the lowest since March 2021, versus consensus 3%.

 

Although the delayed report (due to the government shutdown) showed easing price pressures, economists remain cautious given compilation issues, and this positive shift does not mean persistently above-target inflation has seen sustained relief.

 

Notably, Goolsbee was one of two officials who dissented against the rate cut at last week’s Fed meeting (opposing the cut and favoring holding rates steady).

 

The Fed on December 10 lowered its target rate by 25 bps to 3.5%–3.75%, aiming to balance rising labor market risks while addressing still-elevated inflation. Goolsbee and another regional Fed president voted against the cut, while one official voted for a 50 bps cut.

 

Goolsbee, previously seen as dovish, explained his opposition last week.

 

Goolsbee said Friday he opposed the December cut because he preferred waiting for more inflation data before further easing. “Delaying this discussion until next year carries little additional risk and provides the benefit of recent economic data we’ve lacked,” he said in a statement.

 

In Thursday’s interview, Goolsbee emphasized: “I’m simply uncomfortable easing prematurely before being confident inflation will return to target. We need to see progress on price pressures before relaxing again.”

 

The Fed’s next rate decision is January 27–28, 2026. Per CME FedWatch, the probability of a 25 bps cut in January is 26.6%, with 73.4% odds of holding steady.