Fed Official: Combating Inflation May Require Higher Unemployment

A top Federal Reserve official warned that fighting inflation may require causing economic pain in the form of higher unemployment. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said the central bank is facing persistent supply shocks from higher oil prices due to the Iran war and tariffs.

Typically, the Fed would wait for such shocks to fade and inflation to fall on its own rather than raise borrowing costs. However, Goolsbee suggested that in this case, the Fed may need to take action to combat stubbornly high inflation.

Goolsbee made these comments during a speech in London. He emphasized that the Fed is facing a challenging situation, but did not provide specific details on potential actions the central bank might take to address inflation.