The US Federal Reserve could approve “much more” interest rate cuts this year if inflation resumes falling to the central bank’s 2% target, Chicago Fed President Austin Goolsby said on Tuesday, dismissing a weak recent consumer price report as masking stronger service price increases.

Consumer price inflation for January was a cooler-than-expected 2.4%, but Goolsby said he discounted that result in part because it was influenced by higher inflation readings compared to earlier last year. Services inflation, meanwhile, was “out of control”, running at a high annual rate of 3.2% last month.

“If…we can show that we’re on a path to 2% inflation, I still think there could be a lot more rate cuts in 2026,” Goolsby said on CNBC. “But we have to see that” in the data coming in.

“I think we’re basically stuck at about 3% with some positive signs, but some warning signs,” Goolsby said.

The Fed kept its interest rate steady in the range of 3.5% to 3.75% at its January 27-28 meeting and is expected to do so again at its next meeting on March 17-18.

Recent data has left the Fed in a holding pattern. Job growth in January was a stronger-than-expected 130,000 and the unemployment rate fell slightly to 4.3%, allaying some concerns that the labor market is undermining an argument for an immediate rate cut.

As work continues to return inflation to the 2% target, many policymakers are still concerned that there is a risk of embedding faster-than-desired price increases, a reason to keep rates where they are.

Minutes from the Fed’s January meeting will be released on Wednesday and could provide more details on the depth of concern as the Fed awaits the transition to a new chair. President Donald Trump has nominated former Fed governor Kevin Warsh to lead the central bank when current chairman Jerome Powell’s term ends in May, and investors currently don’t expect a change in rates until the June 16-17 Fed session, which Warsh will lead if confirmed by the Senate in time.

Fed officials, including Powell, have said they expect inflation to resume falling to the mid-2% range, but many like Goolsbee have said they want to see a clearer trend in the coming data.

The Fed sets its target using the personal ⁠consumption expenditure price index, which is separate from the consumer price index and has stalled at around 2.8% since May through the release of the most recent available figures for November. December PCE data is due to be released on Friday and Fed officials have said they expect it to show little if any progress.

If inflation falls to 2%, Goolsby said he sees a Fed policy rate of around 3% as a “loose target” for a neutral interest rate, a level that would require two to three quarter-point rate cuts.

The Fed will release new economic and rate projections at its March meeting. The median projection as of December was for just one more rate cut this year, though 19 policymakers were deeply divided, with eight of them seeing at least a two-quarter-point cut.