Goolsbee: Non-tariff inflation has been disturbingly high

Goolsbee: Non-tariff inflation has been disturbingly high

Chicago Federal Reserve Bank president Austan Goolsbee has highlighted persistent non-tariff-driven inflation as a critical concern, emphasizing that price pressures remain stubbornly above the Federal Reserve’s 2% target. In recent remarks, Goolsbee stated that inflation staying elevated poses a "bigger risk" to economic stability than overly tight monetary policy, underscoring the central bank's commitment to restoring price stability according to Goolsbee. While tariffs have contributed to inflationary pressures—particularly in goods prices, where studies estimate a 31–63% pass-through of tariff costs to consumers—Goolsbee noted that services inflation, excluding housing, has remained unusually high at 3.3% over the past year, a trend he described as "harder to make an optimistic case" for being transitory according to Goolsbee.

The Fed's latest policy decision, which left the federal funds rate unchanged at 5.25–5.5%, reflects a cautious approach as officials monitor inflation's trajectory. Goolsbee acknowledged that while tariffs have driven up goods prices, broader inflationary forces, including labor market stability and services-sector dynamics, remain key focal points. He observed that low hiring and firing rates signal economic uncertainty, complicating efforts to gauge inflation's persistence.

Recent data from the Council of Economic Advisers, however, suggests imported goods prices have fallen since February 2025, contradicting claims that tariffs are a primary inflation driver according to new data. Despite this, Goolsbee stressed vigilance, noting that services inflation and supply-side rigidities continue to challenge disinflation efforts. The Fed's policy outlook now prioritizes maintaining elevated rates longer to ensure inflation returns to target, with officials projecting only 50 basis points of rate cuts in 2026—half the level anticipated earlier this year according to the Fed's analysis.