Fed’s Goolsbee Warns Tariffs Are Stagflationary, Keeps Policy Options Open

Chicago Federal Reserve President Austan Goolsbee warned that the sweeping U.S. tariffs imposed earlier this year constitute a “stagflationary shock” and could impede productivity growth. Speaking at a monetary-policy luncheon in Springfield, Illinois, he said he is uneasy with the notion that the tariffs will deliver only a one-time bump to prices, arguing instead that the levies threaten to raise inflation while dampening output. Goolsbee pointed to the latest Consumer Price Index report, calling the services component “bad” and cautioning that persistent price gains outside tariff-affected categories would be more troubling. With additional inflation data due before the Federal Reserve’s next meeting, he said policymakers will approach the autumn gatherings with an open mind and declined to pre-commit on the future path of interest rates. Addressing labor-market dynamics, the Chicago Fed chief suggested that the recent moderation in payroll growth may stem from a slowdown in population expansion and shifts in immigration rather than a sudden cooling in demand. He emphasized that upcoming economic releases will be critical in guiding the Fed’s decisions in the months ahead.