Goolsbee calls October inflation ‘borderline disturbing’ as Logan backs two more hikes and bonds slide

Chicago Federal Reserve President Austan Goolsbee called the October consumer inflation report “borderline disturbing” and “distressing”^1,2. He said officials have to address elevated inflation², and that services inflation is not coming down after the consumer price index rose 0.4% in October³. Goolsbee does not vote on policy decisions⁹.

Dallas Fed President Lorie Logan said two more rate rises were needed, possibly rapidly^6,18, backing at least two additional quarter-point increases⁴. Philadelphia Fed President Anna Paulson, a voter on the rate-setting committee, said she expects more tightening to come but would prefer to tighten gradually when conditions allow⁷. The remarks followed Governor Christopher Waller’s call for the Fed to raise short-term borrowing costs in December¹¹.

How markets reacted

Treasuries fell the most since the tariff meltdown as bets on rate hikes rose⁸. Traders who had rushed to bonds as a haven were rattled by the reversal¹⁰, and US Treasury futures retreated further on Wednesday as markets priced in more hikes⁹. The sell-off spread to bond markets globally as the hot US inflation data revived fears of Fed tightening¹⁸. “Inflation isn’t moving closer to the Fed’s target,” one market participant said⁸.

Wall Street ended lower as the inflation data and Fed comments heightened rate worries¹¹. The yen weakened to two-month lows against the dollar on Wednesday as expectations for Fed rate increases grew¹². Bitcoin fell to its lowest level in around three months¹³, an 11-week low¹⁴. Gold held a loss near $4,000, although central-bank buying of the metal remains intact¹⁵.

What to watch

Bank forecasters are adjusting. Goldman added another Fed rate hike to its forecast¹⁶, and Deutsche Bank added a January hike after the CPI report¹⁷.

Accounts of the pace officials want differ. Logan said increases might need to come rapidly⁶, while the Deutsche Bank note grouped her with Cleveland Fed President Beth Hammack among officials who have favored a gradual pace¹⁷. Paulson has argued for gradual moves⁷.

The starting point is a benchmark rate of 3.75% to 4%, where the Fed held it at its October meeting, with Governor Lisa Cook and Hammack dissenting¹⁴. The size and speed of the next steps are the questions officials and markets will carry into the December meeting, with Goolsbee, Logan and Paulson all pointing toward tighter policy^1,4,7.