The president of the Federal Reserve Bank of Chicago says the Fed might have to delay interest rate decisions amid President Donald Trump’s volatile tariff policies.
Chicago Fed leader Austan Goolsbee warns in a new interview with CNBC that Trump’s policy choices could also lead to an unfavorable economic environment known as stagflation, which is dominated by stagnant economic growth, high inflation and high unemployment.
“In the short run, we have to just wait for the dust to come out of the air… Everything’s always on the table, but I feel like the bar, for me, is a little higher for action in any direction while we’re waiting to get some clarity.
And then, over the longer run, if they’re putting in place tariffs that have a stagflationary impact, which is to say a slowed-down output by raising the cost of production, while also raising prices, then that’s the central bank’s worst situation.”
Goolsbee says the Chicago Fed has been in conversations with business owners in their districts who say they’re hoping for policy consistency.
“The CEO of a construction company said, for them, they’re now in a put-your-pencils-down moment where they just have to wait. If every week or every month or every day, there’s going to be a new major announcement, they just can’t take action until some of those things are resolved.”
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