(Reuters) - U.S. inflation is cooling at what could prove to be its fastest pace in at least 40 years, if not longer, with only a limited rise in the unemployment rate, Chicago Federal Reserve President Austan Goolsbee said on Tuesday.
Goolsbee, in remarks prepared for delivery to a Detroit Economic Club event, said that unusual feat had never occurred in the U.S. outside of a war and is being driven by a rebound in supply after years of COVID-19 related squeezes, a rise in productivity, and well-anchored inflation expectations.
The biggest non-war-related one-year drop in the consumer price index in the last century was a more-than 4% drop from 1981 to 1982, he said, and in 2023, "we may equal or even surpass," Goolsbee said. "And we may do that with an unemployment rate that never gets above 4%."
U.S. unemployment in October rose to 3.9%, from 3.8% in the prior month. A Labor Department report earlier on Tuesday showed the consumer price index rose 3.2% in October from a year earlier, down more than 3 percentage points from January.
"Progress continues, though we still have a way to go," Goolsbee said. The Fed targets 2% inflation by a different measure, the personal consumption expenditures price index, which was 3.4% in September.
While some analysts have raised the alarm that near-5% economic growth in the third quarter and continued job gains could pave the way for inflation to roar back, recent positive supply developments mean "you can have blockbuster numbers without adding to inflationary pressures," he said.
Going forward, Goolsbee said he's focused on inflation data and sees overheating as a lesser risk than an external shock.
"The key to further progress over the next few quarters will be what happens to housing inflation," he said. "More generally, there are always some bumps in the road as inflation comes down.