Goolsbee Warns Inflation Fight May Come with Economic Pain

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said that fighting inflation may require causing economic pain in the form of higher unemployment.

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

He noted that typically, the central bank would wait for such shocks to fade and inflation to fall on its own rather than raise borrowing costs, but with an ongoing series of persistent supply shocks, the Fed has little choice but to hike rates.

Goolsbee said that raising interest rates is necessary to lower consumer and business demand to a level consistent with reduced supply, which should bring inflation back to the Fed's 2% target.