Federal Reserve's Goolsbee: Expressing Concern About Inflation in a Risk-Filled and Tense Environment

Chicago Fed President Goolsbee said in an interview on Monday that although there has been significant progress in the Iran conflict, he is currently more concerned about inflation than unemployment.

During the interview, the Fed official stated that policy making in the current environment is very challenging. Recently, U.S. President Trump announced progress in negotiations with Iran, during which Iran will suspend further attacks on energy infrastructure for five days.

“The most important thing is to clarify the core development of the situation,” Goolsbee said. “The current tense and risky situation is because no one can tell us how the on-the-ground situation in the Middle East will develop or how long it will last.”

Goolsbee voted against the rate cut in December last year and expressed support for the majority’s decision to keep short-term interest rates unchanged at the FOMC meetings in January and March. He is not a voting member of the FOMC this year but will regain voting rights next year.

After the news of the Iran conflict was announced on Monday, market volatility increased. Traders intensified bets on rate hikes before the end of this year, but expectations remain that rates will be cut in 2027. U.S. stocks rose, while oil prices plummeted.

Last week, FOMC officials indicated that most members still expect to cut rates once this year and once next year. However, Goolsbee said his inclination will depend on inflation progress and warned against repeating the “temporary inflation team’s mistakes”—referring to the Fed’s underestimation of inflation severity in 2021.

“I remain quite optimistic that rates could be lowered before the end of 2026, but I need to see evidence that we are on track to bring inflation down to 2%. This (conflict) has undoubtedly disrupted those plans. We do need to see inflation progress,” he said.