There's a classic scene in The Godfather Part III where Michael Corleone says: "Just when I thought I was out, they pull me back in."

Yeah. That's exactly what American inflation is doing to the Federal Reserve.

Austan Goolsbee, president of the Chicago Fed, took the stage at the National Association for Business Economics (NABE) annual conference on Tuesday and basically said what anyone with two functioning brain cells already knew: inflation at 3% isn't a victory, it's a loss wearing lipstick.

And he made sure to be blunt: "3% is not good enough — and it's not what we promised when the Federal Reserve committed to the 2% target. Parking at 3% is not a safe place."

Let me translate from Fedspeak to plain English: the Fed promised one thing, didn't deliver, and now wants everyone to pretend it's all good. Goolsbee, at least, had the decency not to play pretend.

The Ghost of "Transitory"

Remember back in 2021-2022 when the entire Fed kept parroting that inflation was "transitory"? Powell, Yellen, the whole gang. Well, Goolsbee remembered — with a rare honesty for a bureaucrat — that they already got burned once by assuming inflation was just passing through and they're not making the same mistake again.

"Anticipating many rate cuts is not prudent in this circumstance," he said. "People say prices are one of their most pressing concerns. Let's pay attention."

Look at that. A Fed member saying "let's listen to the people." I nearly fell out of my chair.

The Numbers Nobody Wants to Face

The latest inflation reading — the December core PCE — came in at 3.0%. That's up 0.2 percentage points from November. Part of it is tariffs (which the folks in Washington love to call "temporary," as if temporary doesn't last years in this country). But the part that's really worrying is something else entirely: services inflation.

Services have nothing to do with tariffs on Chinese imports. It's rent, it's healthcare, it's insurance, it's that mechanic charging double what he charged in 2019. And services inflation is stubborn as a mule that won't budge.

Goolsbee made a point of emphasizing this. He knows the market wants to hear that cuts are on the way. But he's a voting FOMC member this year and he's not going to torch his credibility to make futures traders happy.

And the Market? Doing What It Always Does: Betting on What It Wants to Hear

Interest rate futures, according to the CME's FedWatch, show roughly 50/50 odds for a cut in June and about 71% for July. In other words, the market is pricing in a second-half rate cut like it's a done deal.

After three 0.25% cuts at the end of 2025, everybody was already planning the 2026 party. Goolsbee basically showed up with a bucket of ice water.

And he wasn't alone. Christopher Waller, another Fed member who's historically more dovish (in favor of cuts), also struck a more cautious tone on Monday. He said the labor market might be in better shape than people thought — which, translated, means: less urgency to cut rates.

When even the guys who want to cut are hesitating, pay attention to the signal.

What This Actually Means in Practice

For investors, the message is crystal clear: don't count on lower rates in the U.S. anytime soon. And if American rates don't come down, the dollar stays strong, capital keeps flowing stateside, and emerging markets — including our beloved Brazil — stay under pressure.

Nassim Taleb would say the market has a pathological obsession with rate cut predictions. Everybody wants to be the genius who called the Fed pivot early. But the reality is that the Fed is in no rush and, more importantly, it shouldn't be.

Inflation is a silent tax on the poorest. Goolsbee knows this. He said people are worried about prices. And for the first time in a long time, someone at the Fed actually seems to be listening.

The question that remains is: are you going to build your portfolio based on what the market wants to happen or on what the Fed is actually saying?

Because between hope and reality, damn it, reality always wins in the long run.