Chicago Fed President Austan Goolsbee said the Federal Reserve’s primary challenge is determining whether inflation currently running well above target will gradually recede or remain stuck at elevated levels. Speaking on the Marketplace radio program, Goolsbee noted that policymakers are grappling with “an inflation problem that’s well above the target and has been going the wrong way.” He added that the key issue is finding evidence that inflation pressures are temporary and that the economy is “going to get back on path to 2%, which is what we’ve promised.”
Goolsbee highlighted inflation persistence as the crucial question facing policymakers. “The critical through line that we must determine is, in a situation in which the left of the decimal place number is a three or a four, how concerned are we that it’s going to remain a three or a four,” he said. While acknowledging that some inflation may reflect temporary factors such as tariffs and geopolitical disruptions, he stressed that the Fed must determine whether those pressures will naturally fade or become embedded in the broader economy.
Particularly concerning for Goolsbee is services inflation, which he described as “a little more disturbing.” Unlike higher oil prices linked to the Iran conflict or tariff-related increases in goods prices, services inflation has historically proven more persistent. While he noted that tariff effects are “supposed to be one and done” and that a resolution in the Middle East could help reduce inflationary pressures, the continued strength in services prices suggests the Fed cannot yet assume inflation will return smoothly to target. His remarks reinforce the growing focus within the Fed on inflation persistence rather than simply the current inflation rate itself.
