Chicago Federal Reserve President Austan Goolsbee said Friday that interest rates could fall 'a fair bit more' if inflation shows further improvement toward the central bank's 2% target. Speaking with Yahoo Finance, Goolsbee emphasized that while he sees strong economic growth and a stable job market, the Fed needs to see inflation moving back toward its mandate before supporting additional rate cuts.

Goolsbee's comments come as the January Consumer Price Index showed prices rose 2.4% over the prior year, with core inflation at 2.5%. The Fed targets 2% annual inflation. While Goolsbee noted some encouraging signs in Friday's inflation report, he expressed particular concern about persistent services inflation, which he said is 'not tamed' and not driven by tariffs. He also pointed to controlled goods prices where tariff impacts are visible.

Regarding current monetary policy, Goolsbee suggested the Fed has room to cut rates further before reaching what he considers a neutral level where economic growth is neither spurred nor restricted. He noted inflation has been above target for more than 4.5 years and requires improvement rather than relying on self-correction. Data from the CME Group showed investors see a 90% chance the Fed holds rates steady at its March 18 policy meeting.