Fed's Goolsbee Says Strong Demand Driving US Inflation, Signals Faster Rate Hikes Possible

Chicago Fed President Austan Goolsbee said US inflation may now be driven by strong demand, not just tariffs and energy shocks, potentially requiring a faster pace of Federal Reserve interest rate hikes. Speaking on September 21, 2026, in London, Goolsbee said persistent supply-driven inflation and booming AI investment may be pushing prices higher on a broader basis. "If demand overheats, there is no ambiguity about how the Fed needs to respond," he said, noting the rate response could be "more aggressive and more front-loaded." The Fed raised its policy rate by a quarter point last week. Core PCE inflation stood at 3.7% year-over-year in July, well above the Fed's 2% target. Goolsbee, a non-voting FOMC member this year, warned that without evidence these shocks are fading, "the only way back is the hard way."