Federal Reserve Official Warns of Economic Pain in Inflation Fight

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, warned that fighting inflation may require higher unemployment and economic pain.

Goolsbee said the Fed faces a series of persistent supply shocks, including higher oil prices from the Iran war and tariffs, which have driven up inflation. Typically, the central bank would wait for these shocks to fade before raising interest rates, but Goolsbee noted that this is not an option now.

The increases in borrowing costs are necessary to lower consumer and business demand to a level consistent with reduced supply, bringing inflation back down to the Fed's 2% target. However, this means pushing employment below target, which will be 'painful', according to Goolsbee.