Fed's Goolsbee: Prioritize inflation before further cuts

• Key Insight: Chicago Fed President Austan Goolsbee said inflation has not eased as quickly as previously forecast, underscoring the need for a cautious approach to interest rate cuts.
• Expert quote: "I remain optimistic that there can be more rate cuts this year. But that hinges on seeing actual progress on inflation that shows we are on a path back to 2%." — Chicago Fed President Austan Goolsbee.
• Look ahead: Stronger-than-expected January labor market and inflation data make it unlikely the Federal Open Market Committee will cut short-term interest rates at its next meeting.

Federal Reserve Bank of Chicago President Austan Goolsbee said Tuesday morning that the central bank should prioritize getting inflation to its 2% target, as higher prices remain a concern for consumers and businesses.
During an appearance at the National Association for Business Economics conference in Washington, Goolsbee said the Fed should hold off on overstimulating the economy with additional cuts until inflation shows clearer signs of easing.

"I remain optimistic that there can be more rate cuts this year," said Goolsbee. "But that hinges on seeing actual progress on inflation that shows we are on a path back to 2%."

Goolsbee said policymakers should not forget how they were previously "burned" by assuming inflation would be transitory when it was not.

"The fact that over the past several months, the date at which the forecasts say inflation will start falling keeps getting pushed back is not a great sign," said Goolsbee. "I feel that front-loading too many rate cuts is not prudent in that circumstance."

At the December meeting of the Federal Open Market Committee, Goolsbee dissented from a decision to cut interest rates by 25 basis points, citing insufficient data to support the move. Key inflation and labor market reports were delayed or only partially released because of a 43-day government shutdown.

Although Goolsbee is not a voting member this year of the FOMC, his remarks echoed those of Fed Gov. Lisa Cook and Fed Chair Jerome Powell. Both FOMC members have recently emphasized the importance of bringing inflation back to the Fed's target. On the job market, Goolsbee said that despite "statistical pollution" caused by the government shutdown, data shows unemployment holding steady. The unemployment rate was 4.3% in February, up from 4.2% a year earlier, per the Chicago Fed's unemployment rate forecast. 

"The modest aggregate job numbers can't be far from the true break-even point or else the unemployment rate would have been rising," he said. "That's basically the definition of what the break-even point is." Goolsbee said the hiring rate remains the weakest component of the jobs data, calling it low and "a warning flag," but noted it has held relatively steady for a year and a half. The layoff rate and new unemployment insurance claims have also remained low, which he described as normally positive signs.

"Remember, low hiring with low firing is not a normal business cycle combination," said Goolsbee. "But it is exactly the combination you would expect if businesses are dealing with heightened uncertainty."

He added that businesses across the Midwest continue to express concern about market predictability related to tariffs.

"The question marks surrounding the impact of last week's Supreme Court opinion on tariffs and where things go next makes it feel like this dynamic may continue," Goolsbee added.

The Supreme Court on Friday struck down the Trump administration's effort to impose sweeping tariffs in a 6-3 decision. The ruling invalidated the import duties President Donald Trump imposed in mid-2025 on dozens of countries. The administration has said it intends to raise global tariffs to 15% following the court's decision.

Goolsbee said inflation remains the "nagging bit" that must subside to return the economy to what he called a "golden path."

"In recent years we've had to face many unexpected and even unprecedented shocks so I'm sure 2026 will have a few surprises up its sleeve," he said. "But we will keep at it. As I always say — and it's worth remembering in the midst of a record-breaking blizzard— our motto at the Chicago Fed is that there is no bad weather, only bad clothing."