MICHEL MARTIN, HOST:
For more on what the latest consumer price index numbers are showing, Austan Goolsbee is with us now. He is president and CEO of the Federal Reserve Bank of Chicago. Good morning, Mr. Goolsbee. Thanks for joining us once again.
AUSTAN GOOLSBEE: Good morning. Thank you for having me.
MARTIN: As we just heard from our colleague Scott Horsley, consumer prices rose by 3.8% over the last year. Is that about what you were expecting?
GOOLSBEE: It's worse than what we were expecting for today. And it's definitely worse than where it's supposed to be. It's not going to be a secret to anybody who's a American consumer, we got an inflation problem in this country, and we've got to get it back down. The target inflation rate that the Fed has laid out is 2%. And we're way, way above 2%.
MARTIN: So do you agree energy is the main driver?
GOOLSBEE: Yes and no. Energy is the main driver of right now. But part of our problem is we went through a higher inflation period and stopped making progress at the end of last year. That was because of the tariffs, and that was supposed to fade off. It was going to be a one and done matter. And that this energy piles on before that one went away, threatens to be more persistent than is comfortable.
And the worst part in the report, both today and lately, is not the headline being as high as it is. It's that if you start looking at components like services, which aren't driven by tariffs and aren't driven by energy, they're rising, too. And they're higher than where they need to be. So this is a moment of seriousness. And we certainly have to hope that some of these shocks are going to start phasing off soon.
MARTIN: I do want to ask if there's anything the Fed can do about this, but before I do, let me just clarify one thing. There are two measures of consumer prices. There's the headline number, which reflects the cost of a wide array of goods and services. And then there's the core CPI, which omits factors that fluctuate a lot, like food and energy. Are you seeing a significant difference between those two numbers, and does it matter?
GOOLSBEE: Yes, you're seeing a significant difference. And it does matter. Partly, it makes people angry at the Fed that when we say we mostly look at core - what we call the core inflation, which doesn't include food and energy inflation - because people say, what do you mean you're not looking at food and energy inflation? That's the inflation that we're most looking at. But as you say, food and energy are more variable. We tend to think of core as giving a better signal of what's the true through line, if you want to call it that.
Because energy inflation has been as high as it's been and that's bleeding into food, there is a big difference. And the headline has been higher. But the non-headline, the core inflation is not looking great. And that's - sometimes the problems that the economy is facing can be subtle. This time, it's not subtle. I mean, if you just ask people what are they upset about in the economy, all the surveys, all the consumer sentiment measures say it's about prices and about affordability. And that's a reflection that this is happening almost across the board.
MARTIN: Well, sure. Exactly. For a lot of people, food and energy is core. That is core. So to that end, given everything you've said, is there anything that the Fed can do?
GOOLSBEE: Yes and no. I mean, first, everybody's hoping that these shocks, if you want to call them that, prove temporary. That's what they were. They were supposed to not be lasting, and now they're proving a little longer lasting than they were supposed to be. The Fed really has only one tool, and as I say, it's only a screwdriver.
We can loosen or we can tighten. We can't make breakfast. And there are a bunch of things that we can't - we can't pump oil with the interest rate. That said, if you look at the components that are not energy, like services, if that is an indication that the underlying economy is overheating, then the Fed's got to be thinking about, how do we break the chain of escalating inflation?
MARTIN: That's Austan Goolsbee, president and CEO of the Federal Reserve Bank of Chicago. Mr. Goolsbee, thanks so much for joining us once again.
GOOLSBEE: Great talking to you again. Transcript provided by NPR, Copyright NPR.
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