Fed's Goolsbee Warns Rate Hikes May Cut Jobs and Wages to Curb Persistent Inflation

Chicago Fed President Austan Goolsbee warned on September 21, 2026, that the Federal Reserve may have to raise interest rates further to curb persistent inflation, even at the cost of weaker employment, wages, and economic growth. In prepared remarks for an OMFIF event in London, he said supply shocks — from post-pandemic supply chains to oil near $100 a barrel and escalating tariffs — have become a "persistent feature" of the economy, not a temporary phenomenon. Goolsbee noted that forecasters have repeatedly pushed back expectations for an inflation peak. July inflation was estimated at 3.7%, well above the Fed's 2% target, which has not been met for five and a half years. He said strong demand, possibly driven by AI investment, may also be fueling price pressures, leaving "no ambiguity" that further rate hikes would be needed. The Fed raised its policy rate by a quarter point last week, its first hike in three years, and officials projected one more increase by year-end. Goolsbee, a non-voter this year, said restoring price stability will be a painful process and differs from Chair Kevin Warsh's view that lowering inflation need not harm the labor market.