Goolsbee: Both Harris And Trump Are Wrong About 'Inflation'
AInvestMonday, Aug 19, 2024 4:33 am ET
1min read

Inflation has been a focal point of concern for people as well as a focal point in this year's U.S. presidential election - Reducing costs has become the focus of the economic agenda of Trump and Harris's campaign teams.

However, last Sunday, Chicago Federal Reserve Chairman Austan Goolsbee warned against distorting the impact of corporate price increases and tariffs on inflation. Despite the Federal Reserve's commitment to maintaining independence and political neutrality, he did not directly discuss the presidential campaign.

Last Friday, Harris delivered her first economic policy speech after announcing her candidacy. Her economic agenda revolves around an opportunity economy, focusing on reducing the cost of living. According to her, opportunity here refers to everyone, regardless of who they are or where they start, having an opportunity to build wealth for themselves and their children.

That day, Harris promised to work hard to promote the first federal bill in American history to ban food price fraud. Although the details of the bill are still unclear, Harris's campaign team revealed that a series of measures include authorizing the Federal Trade Commission to impose huge fines on grocery stores that overcharge.

Although Goolsbee was reluctant to comment directly on the proposals of Harris's campaign team, he said that high prices cannot be explained solely by the profit motive of enterprises.

 The difference between what's happening to prices and what's happening to costs can vary a lot over the business cycle, so I just caution everybody to conclude from any one observation about markups, he said.

Goolsbee also clarified the inflationary impact of raising tariffs, which is one of the key pillars of Trump's economic plan. Trump has repeatedly promised to raise tariffs on all imported goods. Economists believe that Trump's tough tariff proposals may lead to a resurgence of inflation, although he denies this.

Tariffs raise prices, he said. A one-time cost increase will raise prices but is not an extended inflationary thing.

Goolsbee pointed out that tariffs do not necessarily lead to long-term inflation, but they do raise consumer prices in the short term by increasing production costs.

Whether you want to call that inflationary or not, they raise costs and they raise prices, he said.

Finally, Goolsbee also emphasized that the Federal Reserve is still considering its interest rate decisions. He is one of the most dove members among the Federal Reserve's policymakers. He does not have voting rights in the Federal Open Market Committee this year but will become a rotating voter next year.

Everything is always on the table - there's the possibility of a recession. The last GDP growth number was higher than expected, so that was one of the bright spots, but you've always got to worry about every contingency. That's the job of the central banker, he added.

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