Chicago Fed President Austan Goolsbee Raises Alarm on Tariffs

In a compelling address at the Economic Club of New York, Federal Reserve Bank of Chicago President Austan Goolsbee highlighted the stagflationary risks posed by tariffs. "While short-term tariffs might seem benign, their long-term impact is anything but," Goolsbee stated, emphasizing the unique challenge they present to the Federal Reserve.

The Stagflationary Shock: A Challenge Without a Playbook

Goolsbee described tariffs as a "stagflationary shock," a phenomenon that complicates the Fed's efforts to stabilize the economy. "There's no generic playbook for this," he admitted, pointing to the heightened anxiety within the Chicago Fed district, especially among auto and manufacturing sectors.

Inflation Expectations: Anchored Yet Uncertain

On the topic of inflation, Goolsbee offered a nuanced view. While current inflation expectations are mixed, he reassured that long-term expectations remain "pretty anchored." However, he cautioned against complacency, warning of the potential for a return to pandemic-era economic conditions if confidence erodes.