Federal Reserve Bank of Chicago President Austan Goolsbee said inflation, not labor market weakness, remains the US economy's most pressing problem, in a video interview with Wired published Tuesday, August 11. The comments add to an increasingly public debate among Fed officials over whether the central bank should consider raising rates in the months ahead.
"People Hate Inflation"
"The biggest problem facing our economy right now is not the collapse of industry and the collapse of jobs; it's that the prices have been rising too fast. We got an inflation problem and people hate inflation," Goolsbee said in the interview, which was recorded on June 22 but only released this week. He framed the appearance as primarily an economic-education exercise rather than a venue for signaling specific policy moves, and stopped short of saying whether he supported the Fed's decision to hold rates steady at its most recent meeting.
A "Stable, Without Being Good" Labor Market
Assessing employment conditions, Goolsbee pointed to three indicators — the unemployment rate, the hiring rate, and the layoff rate — as evidence the labor market isn't in crisis. He characterized conditions as "stable, without being good," a description that leaves room for concern without suggesting an urgent deterioration. That framing lands just days after the Bureau of Labor Statistics reported the US economy unexpectedly shed jobs in July, a surprise that led traders to pare back bets on a near-term rate hike.
Where the Fed Stands on Rates
The Federal Open Market Committee voted 9-3 on July 29 to hold its benchmark rate steady in a range of 3.50% to 3.75%, with three regional bank presidents dissenting in favor of a rate hike instead. Inflation has now run above the Fed's 2% target for more than five years. The Fed's preferred gauge, the personal consumption expenditures index, stood at 3.7% year-over-year in June, down from 4.1% in May — a decline partly driven by a temporary ceasefire in the US-Iran conflict that briefly pulled energy prices lower before that truce collapsed.
Goolsbee does not hold a vote on monetary policy this year, but his remarks add another data point to a broader pattern: several regional Fed presidents have repeatedly flagged inflation, rather than employment, as the central bank's dominant concern in recent months. Fed Chairman Kevin Warsh has similarly avoided offering explicit forward guidance on where rates are headed, a stance Goolsbee said he shares, expressing his own doubts about the value of detailed rate signaling.
All Eyes on Wednesday's CPI Report
Goolsbee's comments come just ahead of Wednesday's Consumer Price Index release, which economists expect to show inflation reaccelerated in July after cooling in June. Interest-rate futures traded at CME Group are currently pricing in roughly equal odds of another hold versus a rate hike at the Fed's September 15-16 meeting, reflecting how finely balanced the policy outlook has become between inflation risk and signs of labor market softening.
A Longstanding Concern
This isn't the first time Goolsbee has flagged inflation as the Fed's central challenge. In earlier remarks this year, he pointed specifically to sticky housing costs as a key driver, noting that persistent housing inflation would make it very difficult to bring overall inflation back to the Fed's 2% target, and that supply shortages in housing are a structural problem monetary policy alone can't fix.
With the Fed's voting committee split and regional presidents like Goolsbee continuing to spotlight inflation over jobs, Wednesday's CPI data is likely to weigh heavily on how officials frame their next move in September. For the Fed's official statements and data releases, see the Federal Reserve's press release page.