Chicago Federal Reserve President Austan Goolsbee said he’s more worried about inflation now than he is unemployment.
In a CNBC interview Monday, Goolsbee said Fed policymaking is difficult in the current environment.
He spoke shortly after President Donald Trump announced that progress had been made in talks with Iran and that further attacks on energy infrastructure would be halted for five days as talks continue.
“The most important thing is to figure out the through line of what is happening,” Goolsbee said in a “Squawk Box” interview. “What makes this a fraught but intense moment is nobody can tell us what is going to happen on the ground in the conflict in the Middle East, and how long that lasts.”
Goolsbee dissented on a rate cut in December and said that he agreed with the majority to hold short-term rates steady at the January and March meetings of the Federal Open Market Committee.
Progress of Inflation
He is not an FOMC voter this year but will vote again next year. Last week, FOMC officials last week indicated a majority still expect a cut this year and another the next.
Goolsbee said that his inclination will depend on the progress of inflation, and he cautioned against “a repeat of the team-transitory mistake” where the Fed underestimated the severity of inflation in 2021, CNBC reported.
“I remain fairly optimistic that by the end of ’26 rates could go down, but I wanted to see proof that we’re back on an inflation headed to 2%. This [war] definitely throws a wrench into the plans. We do need to see progress,” Goolsbee said.
Goolsbee added his thoughts to those of two Federal Reserve governors who took to the airwaves last week to talk about what the rest of the year might hold for interest rates.
Saying there was still opportunity for interest rate cuts later this year, Federal Reserve Governor Christopher Waller nonetheless expressed caution Friday about current economic conditions. Also on Friday, Fed Governor Michelle Bowman said that she believes the Fed can cut three times this year, which would take the benchmark federal funds rate below the neutral level that FOMC officials see as neither supporting nor restricting growth.
Waller, who previously advocated for rate cuts, said that recent developments in the labor market as well as the uncertainty of the war with Iran require a more conservative approach.
Rates Held Steady
“It doesn’t mean that I’m going to stay put for the rest of the year,” Waller said on “Squawk Box.” “I just want to wait and see where this goes, and if things go reasonably well and the labor market continues to be weak, I would start advocating again for cutting the policy rate later this year.”
The Fed voted March 18 to hold interest rates steady.
In a Fox interview, Bowman took her position even though she said she expects “strong growth” this year “supported by the supply-side policies that this administration is putting into place.”
Bowman is one of just three Fed officials who see aggressive rate cuts this year, according to an update of the Fed’s “dot plot” grid released Wednesday.
