Fed official contradicts Warsh as he warns fighting inflation ‘is going to be painful’
Por Christopher Rugaber — – World RSS Feed
Fed official contradicts Warsh as he warns fighting inflation ‘is going to be painful’
Austan Goolsbee said in a speech in London that the Fed is facing a series of persistent supply shocks that have driven up inflation, including higher oil prices from the Iran war and tariffs
Christopher Rugaber Monday 21 September 2026 18:08 BST
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The central bank may have to cause economic pain in the form of higher unemployment to combat stubbornly high inflation, a top Federal Reserve official said Monday.
Speaking in London, Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said that continuous supply disruptions, including tariffs and rising oil prices stemming from the Iran war, have pushed inflation higher. Typically, he explained, the central bank would wait for these temporary shocks to clear naturally instead of raising interest rates.
But faced with repeated supply shocks, Goolsbee noted that the Fed has little option left except to raise rates. These rate increases are intended to cool business and consumer demand to match diminished supply, ultimately bringing inflation back to the 2% target.
“The only way to bring inflation down is to raise rates and narrow the gap between supply and demand,” he wrote in prepared remarks. “Forcing inflation back to target in the short run means pushing employment below target. … In the short run, supply shocks force a difficult trade-off” between the central bank’s goals of low inflation and maximum employment.
“It’s going to be painful,” Goolsbee told reporters later. “It would necessarily be painful.”
Goolsbee’s perspective contrasts with comments from Fed Chairman Kevin Warsh at a news conference last Wednesday, following the Fed’s decision to increase its benchmark rate to around 3.9% for the first time in three years.
“I don’t believe that we need to do harm to the labor markets to achieve our objective,” Warsh stated.
The central bank typically counters high inflation by raising rates to slow spending. Historically, such policy tightening has often curbed growth and precipitated economic recessions.
However, during 2022-2023, the Fed rapidly elevated interest rates and successfully lowered inflation without triggering significant job losses or an economic downturn.
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