Fed's Goolsbee calls hotter-than-expected US inflation report 'borderline disturbing'

What happened

The US consumer price index rose by more than forecast in the latest monthly reading. The data drew concern inside the Federal Reserve, with Chicago Fed President Austan Goolsbee describing the report as "borderline disturbing".

The report landed as the central bank weighs whether additional interest rate increases are needed, keeping the policy outlook in focus for markets.

Why it matters

Inflation surprises feed directly into expectations for Federal Reserve policy. When price data comes in above forecasts, traders reprice the path of interest rates, which moves the dollar, government bond yields and risk assets together.

Gold is sensitive to both real yields and the dollar, so shifts in rate expectations tend to show up quickly in the metal. Equity indices react because higher borrowing costs change the discount applied to future earnings, while commentary from individual policymakers can shift sentiment between scheduled meetings.

What to watch

Further remarks from Federal Reserve officials, including Goolsbee, on whether additional hikes are warranted, and the central bank's next policy decision.