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In a Yahoo Finance appearance on Friday, Chicago Fed President Goolsbee (not a 2026 FOMC voter but votes in 2027) remained cautious on near-term rate cut prospects in light of this week's employment and inflation reports. Recall he dissented somewhat surprisingly in December against the 25bp rate cut, and he continues to appear reticent to support easing until he sees clearer signs that inflation is headed to target.

• On the latest CPI report: "There was an encouraging bit in the in the CPI number today, but there were also still some concerns. I would say it's encouraging that on the food and the energy side, you saw pretty significant improvement in goods inflation, which is where mostly we've seen the impact of tariffs. The new month that came in, the number was okay, and the the more concerning part is we're still seeing pretty high services inflation, which is a thing which tends to be persistent. So we're going to still get a producer price index inflation, and we're still going to get some more information. Let's hope that we've seen the peak impact of tariffs on inflation and that that that part proves to be transitory....if you see inflation well above the target in services, that's a danger sign. And I just want to get some more more information before we start front loading the cuts."
• On the latest jobs report: "if you look at the unemployment rate, if you look at a lot of the rate based measures, like the layoff rate is low, while simultaneously the hiring rate is low, that's an unusual combination that doesn't really scream out beginning of recession to me. I thought this month's number... one month is not a trend."
• On the prospect for rate cuts given the latest data: "if we could get some more improvement on the inflation side, as I say, I think rates can still keep going down a fair bit more. But we just need to see the progress on inflation, and we need to see that the job market remains steady like like it has been for a couple of months here."
• On where rates will "settle":  "I don't know how restrictive we are... If you look at core inflation, the new month that that just came in is an annualized rate of 3.6% for core inflation... Let's just be a little circumspect making pronouncements about where rates are going to settle until we're clear that the inflation rate is settling back at 2%. If  we're at an inflation rate of 2% then, as I say, I think rates can go down more, even several cuts more from where they are today, but that's conditional on getting inflation back on a path to 2% which, right nowm we are not on a path back to 2% - we're kind of stuck at 3% and that's not acceptable."

In the upcoming holiday-shortened week, we get the minutes to the January Fed meeting which while stale after the latest data will be watched for the discussion on heightening the bar to further easing. We also get the advance Q4 national accounts release and December personal income and outlays report both on Friday.

See calendar below:

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• Overall, it was a solid week for the dual mandate variables. January’s nonfarm payrolls emboldened the FOMC hawks and all but eliminated the chances of a cut at the next meeting in March, but the more-moderate-than-expected January inflation data were probably enough to keep the Fed’s easing bias alive.
• The BLS Employment report for January was stronger than expected, rebutting various alternative indicators that either surprised lower or were outright soft in the past two weeks.
• And while the 130k payrolls gain and lowest unemployment rate since July came with some caveats, multiple analysts pushed back their expectations for the resumption of the Fed easing cycle beyond March.
• Having received some reassurance on the “full employment” side of the Fed’s dual mandate, January’s inflation report relieved some concerns on the “price stability” goal, with sequential headline and core CPI measures below-expected, though among other issues underlying the figures were a core goods pickup and an expansion of inflation breadth (and opinions vary on the ultimate PCE implications).
• December’s roundly weaker than expected retail sales data also carried a dovish tone, leading to a downward revision to Q4 personal consumption expenditures and raising new concerns about the momentum of consumption going into 2025.
• A patient approach is still expected, at least under Powell’s Fed. A next cut is still not fully priced for June and instead is seen in July, building to 62.5bp of cuts over 2026 vs 60.5bp pre-CPI and 59bp pre-NFP.