Services inflation extends beyond tariff pressures, Fed's Goolsbee warns

Services inflation has picked up over the past few months, Chicago Federal Reserve (Fed) President Austan Goolsbee reiterated on Monday during a Q&A session at the Leadership Greater Chicago event. That acceleration complicates the case that tariffs alone are influencing prices.

Inflation remains the main problem, according to Goolsbee, who said “employment and growth are actually pretty stable,” and stressed that the Fed has “to come to terms with inflation failure.”

Main Takeaways:

Both employment and growth remain fairly steady.

Inflation has accounted for the main problem.

We need to confront the failure on inflation.

Services inflation is beginning to pick up.

Data centres appear to show classic signs of overheating.

Growth has been driven primarily by consumer spending.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

US Dollar: Today's Currency Performance

The Swiss Franc was the weakest performer against the US Dollar. Today's percentage changes for the US Dollar (USD) against the listed major currencies appear in the table below.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.45%	-0.38%	-0.22%	0.07%	-0.52%	-1.14%	0.23%
EUR	0.45%		0.07%	0.25%	0.53%	-0.06%	-0.69%	0.68%
GBP	0.38%	-0.07%		0.19%	0.45%	-0.14%	-0.75%	0.61%
JPY	0.22%	-0.25%	-0.19%		0.28%	-0.31%	-0.94%	0.44%
CAD	-0.07%	-0.53%	-0.45%	-0.28%		-0.59%	-1.21%	0.16%
AUD	0.52%	0.06%	0.14%	0.31%	0.59%		-0.63%	0.75%
NZD	1.14%	0.69%	0.75%	0.94%	1.21%	0.63%		1.38%
CHF	-0.23%	-0.68%	-0.61%	-0.44%	-0.16%	-0.75%	-1.38%

Percentage moves between the major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. Selecting the US Dollar on the left and following its row across to the Japanese Yen, for instance, gives the percentage change for USD (base)/JPY (quote) in the corresponding cell.

Fed: Key Questions Answered

The Federal Reserve's Role and Its Influence on the US Dollar

The Federal Reserve (Fed) sets US monetary policy with a dual mandate: maintaining price stability and supporting full employment. Adjusting interest rates is its main means of pursuing those objectives. If inflation exceeds the Fed’s 2% target and prices are climbing too rapidly, the central bank raises interest rates. Borrowing becomes more expensive across the economy, while the US becomes a more attractive destination for international investment. The result is a stronger US Dollar (USD). Conversely, inflation below 2% or an excessively high unemployment rate may prompt the Fed to cut interest rates. Lower rates encourage borrowing and put pressure on the Greenback.

Eight Annual Fed Monetary Policy Meetings

At the Federal Reserve's (Fed) eight policy meetings each year, the Federal Open Market Committee (FOMC) reviews economic conditions and determines monetary policy. Twelve Fed officials participate in the FOMC: all seven Board of Governors members, the Federal Reserve Bank of New York president and four of the other eleven regional Reserve Bank presidents. Those four seats rotate, with each president serving a one-year term.

Quantitative Easing (QE): The Effect on USD

When conditions become extreme, the Federal Reserve may turn to Quantitative Easing (QE) to expand credit flows substantially through a stalled financial system. This unconventional tool is used in crises or periods of exceptionally low inflation. During the Great Financial Crisis in 2008, it was the Fed’s preferred policy response. Under QE, the Fed prints additional Dollars to purchase high-grade bonds from financial institutions. The US Dollar typically weakens as a result.

Quantitative Tightening (QT): The Effect on the US Dollar

Reversing QE, quantitative tightening (QT) sees the Federal Reserve halt bond purchases from financial institutions. It also stops reinvesting principal from maturing bonds in its portfolio into new bonds. This process generally supports the US Dollar's value.