Chicago Fed President Austan Goolsbee downplayed the risk of a 1970s-style stagflation scenario. He noted that with unemployment near 4% and inflation around 2.5% and falling, the current environment bears little resemblance to the high-inflation, high-unemployment era.
Speaking overnight, Goolsbee emphasized that today’s economic fundamentals are far stronger, with inflation far below double digits and labor markets still tight.
However, he cautioned that simultaneous deterioration in both inflation and employment remains possible. “There’s definitely the possibility of both things getting worse at the same time,” he said. Goolsbee framed the outlook in terms of evaluating how large and lasting each side’s deviation might be—whether shocks are temporary or structural.
