WASHINGTON, March 23 - Inflation is the more pressing threat to the U.S. economic outlook at present, according to Chicago Federal Reserve President Austan Goolsbee, even as the unemployment rate has remained fairly steady.
Speaking on CNBC's Squawk Box, Goolsbee said that with labor market readings not deteriorating, the Fed's focus should tilt slightly toward price stability. "At the moment I think inflation has got to be a little ahead of employment" as a Fed priority, he said.
The central banker pointed to recent strength in gasoline prices as a particular worry because of its potential influence on consumer expectations. He described the combination of a still-elevated inflation rate and an added gasoline price shock as creating an "intense moment." "To have already been at an inflation rate that was uncomfortably high...and now to add something that might be a lasting gasoline price shock, this is an intense moment and we have to hope that this does not prove to be a lasting impact on the economy," Goolsbee said.
Goolsbee also left open the possibility that monetary policy could ease later in the year if geopolitical developments change. He noted that a quick resolution to the Iran conflict could alter the outlook enough to leave the Fed positioned to cut interest rates before year-end, while stressing that the current balance of risks favors prioritizing inflation control.
Context and implications
Goolsbee's remarks emphasize the Fed's vigilance on inflation and the importance of expectations in shaping future price dynamics. With unemployment not rising materially, the central bank's policy calculus may shift toward preventing persistent inflationary pressures, particularly those that could be reinforced by higher energy costs.
The commentary signals that while easing remains possible if external shocks abate, policymakers are sensitive to the risk that temporary shocks become entrenched in consumer behavior and pricing decisions.