Chicago Fed's Goolsbee Warns Against Rate Cuts Amid Rising Inflation

Chicago Federal Reserve President Austan Goolsbee has cautioned against further interest rate cuts while inflation remains above the Fed's 2% target, warning that holding rates steady amid rising inflation effectively acts as a rate cut, potentially fueling more price increases. Goolsbee emphasized the importance of maintaining vigilance to avoid premature easing, noting that current Fed policy is mildly restrictive rather than excessively tight, as evidenced by robust business investment and only mild labor market cooling. Despite persistent inflation above target for over four years, Goolsbee firmly rejected speculation that the Fed has raised its inflation target, affirming the commitment to returning inflation to 2%. Meanwhile, inflation is projected to remain above target until at least 2028, presenting a significant challenge for the Federal Reserve, which must balance price stability with economic growth amid tariff uncertainties and persistent inflation pressures. The Fed's prolonged struggle to meet its inflation goal risks eroding credibility and may prompt discussions about reconsidering the inflation target framework, though any change would be complex and sensitive. Overall, the Federal Reserve faces a difficult path forward as it navigates inflation control without jeopardizing the labor market or economic expansion.