Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee said on Thursday that inflation remains the central challenge for policymakers, warning that price pressure is still moving in the wrong direction despite some signs of improvement in services. He said that the Personal Consumption Expenditure (PCE) inflation report wasn’t “all negative” in an interview with CNBC.

Key takeaways:

Inflation is “going the wrong way,” and it remains difficult to determine how much of the current pressure is temporary and how much is persistent.

Some inflation pressure may be driven by one-off factors, but services inflation remains more concerning and “a little more disturbing.”

The PCE report “wasn’t all negative,” as Goolsbee noted some improvement in services, though inflation remains well above where it needs to be.

Core inflation is still “well too high” and trending in the wrong direction, keeping the inflation side of the Fed’s mandate as the main problem.

Goolsbee said he has long been uneasy with forward guidance and does not want to commit to forecasts years ahead, although he does not dislike the dot plot.

He welcomed the Fed Chair’s task force reviewing options around the dot plot and also applauded efforts to streamline the Fed statement.

On artificial intelligence, Goolsbee warned that if markets price in future productivity gains and consumers start spending based on those expectations, it could create overheating risks.

He added that spending today based on expected future gains makes him nervous about potential inflationary pressure.

Says wages are not a great leading indicator for inflation, warning that inflation could rise before wages move higher.”