Fed Official Warns Inflation Fight May Be Painful

A top Federal Reserve official warned on Monday that fighting inflation may require 'painful' measures to combat stubbornly high prices. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, stated in a speech in London that the central bank is facing persistent supply shocks that have driven up inflation.

Goolsbee attributed the inflation to higher oil prices from 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, with ongoing series of persistent supply shocks, the Fed has little choice but to hike rates, Goolsbee said. The increases are needed to lower consumer and business demand to a level consistent with reduced supply, which should bring inflation back to the Fed's 2% target.