Chicago Fed President Austan Goolsby said Monday that despite clear progress in the war with Iran, he is now more concerned about inflation than unemployment.
The central bank governor said in an interview with CNBC that policy decisions are difficult to make in the current environment. His remarks came shortly after President Donald Trump announced progress in negotiations with Iran and a five-day moratorium on further attacks on energy infrastructure while negotiations continue.
“The most important thing is to get the full picture of what’s going on,” Goldsby said in an interview on “Squawk Box.” “What makes this a difficult but tense moment is that no one can tell us what will happen on the scene of conflict in the Middle East or how long it will last.”
Goolsby opposed the rate cut in December and said he agreed with the majority at the Federal Open Market Committee meetings in January and March to keep short-term interest rates unchanged. He is not a FOMC voter this year, but plans to vote again next year.
Markets were volatile following news of the war on Monday, with traders increasing bets on rate hikes by the end of the year, but still expecting a rate cut in 2027. Stock prices soared and oil prices fell.
FOMC officials signaled last week that a majority still expect rate cuts this year and again next year. But Goolsby said his trends depended on how inflation progressed and cautioned against a “repeated team mistake” in which the Fed underestimated the severity of inflation in 2021.
“I’m still pretty optimistic that interest rates could come down by the end of 2026, but I wanted to see evidence that we’re getting back to inflation heading towards 2%. This (war) definitely puts a dent in the plans. We need to see progress.”
