Data released by the U.S. Bureau of Labor Statistics on May 12th showed the Consumer Price Index (CPI) for April increased by 3.8% year-over-year, exceeding the market expectation of 3.7% and reaching the highest level since May 2023. The core CPI, which excludes food and energy, rose by 2.8% year-over-year, surpassing the forecast of 2.7% and hitting a high not seen since September 2025.
Chicago Federal Reserve Bank President Austan Goolsbee stated that the data showing an acceleration in U.S. consumer inflation for April was disappointing, indicating inflation is moving in the wrong direction. He specifically noted that price pressures in the service sector are currently the most concerning area, and this issue is not caused by oil prices or tariffs.
Goolsbee: Services Are the Key "Surprising and Disappointing" Factor Speaking at an event in Rockford, Illinois, Goolsbee pointed out, "Inflation is moving in the wrong direction, and not just in factors related to oil prices or tariffs." He stated that while the overall data was in line with expectations, the performance of the services sector was "surprising and disappointing."
He further emphasized, "This is exactly what worries me. I would like to see services inflation at least stop rising and eventually start to come down, because this is unlikely to be caused by oil prices."
Goolsbee Dissents on Holding Rates Steady At the Fed's April meeting, the decision was made to keep the short-term borrowing rate unchanged in the range of 3.50%-3.75%. Goolsbee cast a dissenting vote, citing his disagreement with the statement's biased language regarding future rate cuts.
Goolsbee said, "We need to recognize that the job market is basically stable, while inflation is rising. We are not currently in a difficult trade-off between the Fed's dual mandates. One mandate is deteriorating on one side, while the other is not improving on the other side. Therefore, we must remain vigilant about this in the near term."
Goolsbee Praises Powell, Political Maneuvering Continues Goolsbee spoke highly of outgoing Fed Chair Jerome Powell, calling him an "unquestionably first-rate Fed Chair" and noting his success in averting a financial crisis during the COVID-19 pandemic and the collapse of several major banks. He specifically mentioned, "In 2023, we achieved a significant decline in inflation without a recession, which is almost unprecedented, and this was accomplished against a backdrop of questions about the Fed's independence."
It is worth noting that a former U.S. President attempted to remove a sitting Fed governor; this case is currently before the Supreme Court. He also supported a criminal investigation into Powell, but a federal judge has ruled that the investigation was merely a pretext to force Powell to cut rates or resign. Powell's successor, Michelle Bowman, was confirmed to the Fed Board of Governors on Tuesday and is expected to be formally confirmed as Fed Chair as early as Wednesday.
Vigilance on Inflation Remains Paramount, Policy Outlook Faces Multiple Variables Goolsbee expressed serious concern about the current trajectory of inflation, particularly its persistent rise in the services sector. He believes current monetary policy should maintain a high degree of vigilance against inflation rather than prematurely leaning towards rate cuts. Meanwhile, the transition in Fed leadership and the ongoing political maneuvering surrounding its independence continue to add more uncertainty to the future policy path.
As of the time of writing, the U.S. Dollar Index was trading around 98.30, up slightly by about 0.06% on the day, with an amplitude of only 0.08%, indicating the market entered a brief period of narrow consolidation after the release of key data and policy signals.
Nick Rees of Monex Europe noted in a report that the dollar's reaction to the higher-than-expected U.S. inflation data on Tuesday was muted because this data is unlikely to change the Fed's policy narrative. The year-over-year U.S. inflation rate rose to 3.8% in April, primarily driven by rising energy prices. "Given recent geopolitical developments, this outcome is not surprising, and in the absence of evidence of broadening price pressures, FOMC voting members are likely to look past this number." The rise in inflation also reflects some other one-off factors.
At 9:40 Beijing Time on May 13th, the U.S. Dollar Index was reported at 98.30.
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