Goolsbee Sounds Alarm on Persistent Inflationary Pressures

Chicago Federal Reserve President Austan Goolsbee is sounding the alarm on inflation, suggesting that supply shocks may be more persistent than initially thought. Speaking at an Official Monetary and Financial Institutions Forum event, Goolsbee said that the Fed needs evidence that these pressures are fading before it can credibly forecast inflation returning to 2%. The post-pandemic experience has shown that supply disruptions have become more frequent, with their inflationary effects proving longer-lasting than expected.

The prolonged price growth has increased the risk of businesses and consumers adjusting their behavior in response. This could lead to higher rates, slower growth, and weaker hiring. Goolsbee also raised a less obvious possibility: America's AI investment boom may be pushing demand beyond what the economy can comfortably supply. Rapid spending on data centers requires construction labor, power, equipment, and financing, which can support growth but also intensify competition for scarce resources.

The Fed's own projections point to another quarter-point hike this year, with 12 of 18 officials expecting one more hike and four expecting two more. The median projection for year-end rates rose to 4.1% from 3.8% in June. Traders assigned a 53% probability to another quarter-point increase at the October meeting.