Fed Official Warns Inflation Fight May Require Economic Pain

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, warned that fighting high inflation may be 'painful' and could require the central bank to cause economic pain through higher unemployment.

Goolsbee stated in a speech in London that the Fed is facing persistent supply shocks, including higher oil prices from the Iran war and tariffs, which have driven up inflation.

The typical approach would be to wait for these shocks to fade, but with ongoing supply chain issues, the Fed has little choice but to hike interest rates to lower demand and bring inflation back down to its 2% target.

Goolsbee acknowledged that this will require a difficult trade-off between low inflation and maximum employment, as raising rates can slow growth and even lead to recessions.