Fed’s Goolsbee warns supply shocks could force painful inflation tradeoff

Fed’s Goolsbee warns supply shocks could force painful inflation tradeoff

The Chicago Fed president says repeated supply disruptions have changed the rules of the game, and getting back to 2% inflation won't be quick or painless.

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By Editorial Team
Edited by Vivian Nguyen

Persistent supply shocks, including oil tariffs and commodity prices, are raising the risk that inflation will remain elevated longer than previously expected, said Federal Reserve Bank of Chicago President Austan Goolsbee at an Official Monetary and Financial Institutions Forum event on Sept. 21.

He said expectations for when inflation would peak and start falling have been repeatedly pushed back, from Q4 2025 to 2026 and now to sometime in 2027.

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Goolsbee said the continued delays make it difficult to characterize inflation pressures as a temporary shock. He said policymakers need to see evidence that supply shocks are actually fading before they can credibly continue looking through their effects on inflation.

While the appropriate policy response may be smaller than one triggered by demand overheating, Goolsbee said it would not be painless. The central bank could face a difficult tradeoff between inflation and unemployment, similar to the pressures associated with stagflation.

He said he remains somewhat hopeful that supply pressures will not persist, but called the possibility the greatest danger facing the economy.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
POLITICS
Fed’s Goolsbee warns supply shocks could force painful inflation tradeoff
Fed’s Goolsbee warns supply shocks could force painful inflation tradeoff

The Chicago Fed president says repeated supply disruptions have changed the rules of the game, and getting back to 2% inflation won't be quick or painless.

By Editorial Team
Edited by Vivian Nguyen

Share

Add us on Google

Persistent supply shocks, including oil tariffs and commodity prices, are raising the risk that inflation will remain elevated longer than previously expected, said Federal Reserve Bank of Chicago President Austan Goolsbee at an Official Monetary and Financial Institutions Forum event on Sept. 21.

He said expectations for when inflation would peak and start falling have been repeatedly pushed back, from Q4 2025 to 2026 and now to sometime in 2027.

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Goolsbee said the continued delays make it difficult to characterize inflation pressures as a temporary shock. He said policymakers need to see evidence that supply shocks are actually fading before they can credibly continue looking through their effects on inflation.

While the appropriate policy response may be smaller than one triggered by demand overheating, Goolsbee said it would not be painless. The central bank could face a difficult tradeoff between inflation and unemployment, similar to the pressures associated with stagflation.

He said he remains somewhat hopeful that supply pressures will not persist, but called the possibility the greatest danger facing the economy.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.