Fed Official Warns Inflation Fight Will Be 'Painful'

A top Federal Reserve official warned that fighting inflation may come at a significant economic cost. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, made this statement in a speech in London.

Goolsbee said the Fed is facing a series of persistent supply shocks that have driven up inflation, including higher oil prices from the Iran war and tariffs. Typically, the central bank would wait for such shocks to fade, but Goolsbee noted that the current situation requires rate hikes to lower consumer and business demand.

The goal is to bring inflation back down to the Fed's 2% target, but this means pushing employment below target in the short run. 'It's going to be painful,' Goolsbee said. He acknowledged a difficult trade-off between the Fed's goals of low inflation and maximum employment.

This stance contrasts with that of Federal Reserve Chairman Kevin Warsh, who last week stated that rate hikes do not necessarily harm labor markets.