Chicago Fed President Austan Goolsbee stated in an interview on Monday that, despite visible progress in the Iran conflict, he is currently more concerned about inflation than unemployment.
During the interview, the Federal Reserve official noted that policymaking is particularly challenging in the current environment. This comes shortly after U.S. President Trump announced progress in negotiations with Iran, stating that Iran would suspend further attacks on energy infrastructure for five days during the ongoing talks.
"The most important thing is to clarify the core trajectory of developments," Goolsbee said. "The current situation is risky and tense because no one can tell us how the on-the-ground conflict in the Middle East will evolve or how long it will last."
Goolsbee dissented from the interest rate cut decision last December and expressed support for the majority's decision to hold short-term rates steady at the January and March Federal Open Market Committee (FOMC) meetings. Although he is not a voting member of the FOMC this year, he will regain voting rights next year.
Following Monday's developments regarding the Iran conflict, market volatility intensified. Traders increased bets on a rate hike by the end of this year but still anticipate rate cuts by 2027. U.S. stocks advanced, while oil prices plunged.
FOMC officials indicated last week that most members still expect one rate cut this year and another next year. However, Goolsbee emphasized that his stance will depend on inflation progress, warning against repeating the mistakes of the "transitory inflation team"—referring to the Fed's underestimation of inflation severity in 2021.
"I remain fairly optimistic that rates could be lowered by the end of 2026, but I need to see evidence that we are back on track toward bringing inflation down to 2%. This conflict has certainly disrupted those plans. We really need to see progress," he said.
Comments