{"id":52667,"date":"2025-10-03T04:24:16","date_gmt":"2025-10-03T04:24:16","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/52667\/"},"modified":"2025-10-03T04:24:16","modified_gmt":"2025-10-03T04:24:16","slug":"fed-president-warns-inflation-is-going-the-wrong-way-as-tariff-concerns-mount","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/52667\/","title":{"rendered":"Fed president warns inflation is ‘going the wrong way’ as tariff concerns mount"},"content":{"rendered":"\n

On Tuesday, Federal Reserve<\/a> Bank of Chicago President Austan Goolsbee warned about rising inflation and said it isn’t clear whether tariff-induced price hikes will be a one-off or could pose a more persistent challenge for policymakers if stagflation sets in.<\/p>\n

Goolsbee spoke with FOX Business’ Edward Lawrence at the Midwest Agriculture Conference on Tuesday and said that inflation’s recent rise is concerning after the pace of price growth was easing from the 40-year high reached in 2022 amid the post-COVID inflation surge.<\/p>\n

“I would be nervous that we’ve spent four and a half years with inflation above the target of 2% and it had been falling, falling, falling so at least I was believing and making the argument we’re on a path back to 2%,” Goolsbee said. “Now, it’s going the wrong way\u2026 Inflation has been rising for several months.”<\/p>\n

Goolsbee explained that while he hopes the\u00a0rise in inflation<\/a> is a temporary or transitory phenomenon, he warned that if “inflation proves more persistent now, just as it did in ’21, ’22, that would be a really difficult scenario for the Fed or for any central bank because then it would be what I call a stagflationary direction” that would test the Fed’s ability to satisfy both of its dual mandate goals.<\/p>\n

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\"Chicago Chicago Fed President Austan Goolsbee warned that rising inflation presents a challenge to the Fed as it considers further rate cuts. <\/p>\n

“We have, by law, a dual mandate to maximize employment and stabilize prices. Normally, one side is getting worse and the other side is getting better,” he explained. “So if you’re overheating, unemployment is very low and inflation is the problem. If you’re going into recession, it’s the opposite. If they both start going wrong at the same time, now it’s not obvious what you do.”<\/p>\n

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The\u00a0labor market<\/a> has also cooled in recent months, making that dilemma a live issue confronting the central bank as it weighs its next move following the first interest rate cut of 2025 in September.<\/p>\n

Fed Chair\u00a0Jerome Powell<\/a> has said that the Fed’s framework directs policymakers to focus on whichever dual mandate goal is further from the target in such a scenario.<\/p>\n

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That strategy could still present challenges for the economy and Fed policymakers, as Powell recently cautioned that there is “no risk-free path” for the economy given the risks of higher inflation and a weaker labor market.<\/p>\n

Cutting interest rates to support the labor market while inflation is already elevated above the Fed’s 2% target could spur\u00a0economic activity<\/a> to the extent that inflation creeps higher, while raising interest rates to stem inflation can cause the labor market to slow further.<\/p>\n

Goolsbee has used what he calls the “11% lane” as a framework for assessing whether\u00a0tariff-induced price hikes<\/a> are confined to imported goods, or are having broader macroeconomic impacts, after noting earlier this year that goods imports equated to 11% of U.S. GDP in 2024.<\/p>\n

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Goolsbee is concerned about tariffs possibly impacting intermediate goods, which are components used to make finished products \u2013 or in this case, imported goods used in finished products made by\u00a0U.S. manufacturers<\/a>.<\/p>\n

“I want it to be, that’s what I hope it is, and I hope that the impact of that one-time increase is modest in size, that it stays in its 11% of GDP lane. The things that start making me nervous are when the tariffs begin applying to intermediate goods\u2026 now it’s getting out of its lane, and it’s raising costs on production,” he said.<\/p>\n

The\u00a0Chicago Fed<\/a> chief added that services inflation has trended higher, which could be a warning sign that tariff inflation won’t represent a one-time inflation hike as he hopes.<\/p>\n

“If we were to see a continuation of what we’ve now seen for a little bit, which is inflation rising in services \u2013 it’s very hard to explain why services inflation is rising from tariffs, and that would make me nervous that it’s not a one and done. And then the other thing is that’s all premised on it being one and done, and this has so far not been one and it doesn’t seem done,” Goolsbee said.<\/p>\n

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