Investing.com -- Austan Goolsbee, President of the Chicago Federal Reserve, stated on Thursday that he does not anticipate the upcoming inflation reading from the U.S. central bank to be as severe as the previously reported Consumer Price Index (CPI) figures.

Last week, the Labor Department reported a higher than expected increase of 0.5% in the CPI for January, month-over-month. The figure for the year also rose back to 3%, the first time since June, and has been on an upward trend since September. The Personal Consumption Expenditures Price Index, which the Federal Reserve utilizes for its 2% inflation target, is set to be released next week. Most economists predict this figure will indicate a smaller increase than the CPI.

During a Chamber of Commerce event in Chicago, Goolsbee commented on the CPI numbers, stating, "The CPI number was not great. The PCE number ... is probably going to still be not great, but it's not (going to be) as sobering as the CPI number."

Goolsbee highlighted the significant progress made in reducing inflation from the four-decade highs seen in 2022. He also noted the ongoing uncertainty surrounding the economy and the impact of the new Trump administration's evolving tariff policies.

Since his inauguration on January 20, President Donald Trump has consistently proposed or implemented tariffs on goods from key U.S. trading partners, including China, Mexico, and Canada. Goolsbee expressed concern about the potential for these large-scale tariffs to cause a significant supply shock, which could exacerbate inflation, similar to the effects seen during the COVID-19 pandemic.

Goolsbee stated that the tariffs imposed during Trump's first term did not materially impact inflation. This was partly due to their narrow scope and sufficient exemptions, which did not disrupt supply networks. However, Goolsbee cautioned that the broader and higher tariffs currently being developed by Trump could cause concern, depending on their scale and the number of countries they apply to. He said, "And the more it looks like a COVID-sized shock, the more nervous you should be about that."

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