Chicago Fed president Austan GOOLSBEE said US inflation has run above the Fed's
2% target for more than five-and-a-half years, calling prolonged above-target
inflation "playing with fire." He warned that if supply shocks prove persistent,
the Fed may need to rethink prior policy logic that largely ignored such shocks.
GOOLSBEE said policymakers need clearer evidence that inflation is declining and
that previously deemed transitory factors are fading before considering rate
cuts. He flagged large fiscal deficits as stimulative and a potential
overheating risk, and said market expectations of AI-driven productivity gains
could contribute to near-term overheating, so the Fed should monitor
productivity trends. GOOLSBEE added oil prices could fall quickly but the slower
issue is the pace of refinery restarts; energy prices, AI investment and fiscal
Stimulus could all affect the future inflation path.
