Key Points
Goolsbee stated that Asia is experiencing a classic stagflationary shock. Although oil prices have recently retreated, they remain significantly higher than pre-conflict levels.
On May 6, 2026, Chicago Fed President Austan Goolsby spoke at the 29th Milken Institute Global Conference in Beverly Hills, California. Chicago Fed President Austan Goolsby stated that energy inflation has persisted longer than anticipated due to the Iran situation, delivering a stagflationary shock to Asian economies. These remarks were made during an interview with CNBC's Kaori Endo at the Bank of Japan's Institute for Monetary and Economic Studies conference. He noted that futures markets had previously projected energy prices would be much lower than current levels. Despite recent progress in U.S.-Iran talks leading to a recent pullback in oil prices, they remain substantially elevated compared to levels before the conflict. The international benchmark Brent crude futures rose 1.81% to $96 per barrel, while U.S. West Texas Intermediate crude futures increased 1.71% to $90.21 per barrel. Prior to the U.S.-Israel strikes on Iran, Brent was at $72 per barrel and WTI at $67.02. Goolsby also issued a warning for Asian economies. As Asia is largely an energy-importing region, this shock represents a classic, traditional stagflation crisis. Goolsby cast a dissenting vote at the Fed's final rate cut meeting in 2025. He explained that at the time, he did not see compelling evidence that inflation would fall in the short term. He added, "I do not regret that dissenting vote. It turned out inflation was not as transitory as initially expected." However, he also stated that if inflation gradually returns to the Fed's 2% target, interest rates would ultimately be significantly lower than their current position. AI Could Cause Economic Overheating When discussing AI's potential to boost productivity, Goolsby expressed concern that financial market speculation is running ahead of the actual economic benefits from AI implementation. He said, "Markets are betting that AI will significantly boost productivity and create wealth in the future, driving up stock prices. People, feeling wealthier on paper, increase their spending, which could lead to short-term economic overheating even before AI translates into actual productivity gains." He advised policymakers to closely monitor whether AI-driven stock market gains could further push up overall inflation. "We need to watch whether significant stock market appreciation is leading to a major increase in household consumption, and whether investments related to data centers are pushing up electricity prices and construction labor costs, thereby putting pressure on short-term U.S. inflation." He also noted that the impact of new technology is not confined to a single country; the aforementioned trends would eventually affect Asian economies as well. "If AI does drive productivity growth, that trend will also spread to Asian countries soon."
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