The head of the Federal Reserve Bank of Chicago, Austin Goolsbee, described the continuation of inflation rates above the US central bank’s target for five and a half years as “playing with fire,” warning that the Fed may find itself forced to intervene to confront possible supply-side shocks with long-term effects.
Goolsby described this situation as “uncomfortable,” stressing at the same time the need to deal seriously with these ongoing shocks. Although he is classified as one of the most optimistic policymakers about the path of interest rates within the Federal Reserve, he stressed that making a decision to reduce interest is conditional on obtaining “clear evidence confirming the return of inflation to the path of decline, and the decline of factors that are supposed to be actually temporary.”
This comes as the US Central Bank raised the key interest rate to a range between 3.75% and 4.00%, in parallel with expectations expressed by 16 out of 18 policy makers of the necessity of making at least one additional increase in interest rates before 2026.
In the same context, the Federal Reserve hinted at taking additional steps to tighten monetary policy, as the bank’s president, Kevin Warsh, stressed the independence of the monetary institution, despite repeated calls from US President Donald Trump calling for an interest rate cut.
