Federal Reserve's Goolsbee: Service sector inflation may reflect an overheating economy, beware of the "inflation spiral"

BlockBeats news. On May 12, Federal Reserve Governor Goolsbee provided his latest remarks, saying that compared with energy prices that are more heavily influenced by geopolitical factors, the Federal Reserve is currently more focused on whether the rise in service-sector prices reflects overheating in the U.S. economy from within.

Goolsbee said that if inflation in the service sector continues to rise and evolves into “endogenous inflation,” the Federal Reserve must consider taking measures to “break the escalating inflation chain.” The U.S. CPI rose 3.8% year-over-year in April, hitting a new high since 2023. Although gasoline prices have increased by about 28% over the past two months, becoming an important factor driving overall inflation, Goolsbee believes that even after excluding energy and tariff factors, price pressures are still expanding.

Data shows that in April, core service costs in the U.S. excluding energy and housing rose 0.5% month-over-month. Among them, hotel prices recorded the largest increase since 2024, while airline ticket prices rose 2.8% month-over-month due to fuel surcharges and lower capacity.

Meanwhile, in April, the inflation-adjusted average hourly earnings in the U.S. fell 0.3% year-over-year, the first negative reading in nearly three years, indicating that residents’ income growth has started to lag behind price increases.

From a policy perspective, the Federal Reserve has kept interest rates at above 5% for several consecutive months. With inflation continuing to stay above the 2% target, market expectations for rate cuts in 2026 have clearly cooled, and U.S. Treasury yields have continued to rise recently. Goolsbee emphasized that the key task at present is to “cut off the inflation spiral.” The PPI and PCE data that will be released soon will become an important basis for judging whether the U.S. economy is experiencing sustained overheating.