Federal Reserve Official Warns Higher Unemployment May Be Price of Taming Inflation

A top U.S. Federal Reserve official warned that fighting inflation may be 'painful' for the economy, requiring higher unemployment rates to bring down prices.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, made the comments in a speech in London on Monday, September 21, 2026. He stated that the Fed is facing persistent supply shocks, including higher oil prices due to the Iran war and tariffs.

Goolsbee noted that under normal circumstances, the central bank would wait for such shocks to fade before raising interest rates. However, with an ongoing series of supply shocks, the Fed has no choice but to hike rates to lower consumer and business demand and bring inflation back down to its target rate of 2%.

Goolsbee's comments contradict those made by Fed Chairman Kevin Warsh last week, who said that raising interest rates would not necessarily harm labor markets. Goolsbee emphasized that 'in the short run, supply shocks force a difficult trade-off' between low inflation and maximum employment.