Chicago Fed President on inflation, recession, and Trump’s attacks
Thursday, 27 August 2026 · 2 min read · Listen to the episode ↗
In this episode, Chicago Fed President Austin Goolsbee addresses the complexities of inflation and recession amid geopolitical tensions and trade issues. He discusses the Federal Reserve's dual mandate of stabilizing prices and maximizing employment, highlighting the challenges posed by tariffs and the potential for a self-fulfilling inflation cycle. Goolsbee also explores the impact of artificial intelligence on productivity and job markets, cautioning about the risks of tech overvaluation and its implications for economic stability.
Austin Goolsbee discusses the current economic uncertainty, linking it to geopolitical factors and trade issues. He emphasizes that the Federal Reserve's main responsibilities are to stabilize prices and maximize employment, but acknowledges that the tools used to combat inflation can inadvertently lead to higher unemployment, complicating the Fed's decision-making process.
Goolsbee highlights the role of tariffs, which are set by the administration and Congress, noting that while they are intended to have a one-time effect on prices, repeated tariffs can complicate the inflation outlook. He warns that if inflation is perceived as persistent, it could create a self-fulfilling cycle of rising prices and wages, making the Fed's job significantly more challenging.
Despite inflation remaining above the Fed's 2% target for nearly six years, Goolsbee points out that the economy is relatively strong. However, many Americans are concerned about affordability and rising costs. He notes that businesses are facing significantly higher input costs, while farmers are struggling with low selling prices and high expenses.
Goolsbee observes that while a majority of Americans are aware of the Federal Reserve, many do not fully understand its functions. There is a growing perception that the Fed is not performing well, compounded by unprecedented political pressure, including direct attacks on officials and calls to lower interest rates, which threaten the central bank's independence.
The conversation also addresses the impact of artificial intelligence on the economy, with varying effects expected across different sectors. Goolsbee mentions that while AI has the potential to enhance productivity, the recent growth rate has not been impressive. He cautions that if tech valuations are justified, significant job losses could occur, while overvaluation may lead to a stock market correction.
Goolsbee concludes that the economy is stable but not thriving, characterized by low hiring and firing rates. He suggests that the focus should shift to rate-based measures for assessing economic stability, as monthly job creation numbers may not accurately reflect recession risks due to immigration policies affecting labor supply.
This summary was generated from the episode transcript and can contain mistakes.