Fed’s Goolsbee Urges Patience: Inflation Must Return to Target Before Rate Cuts

Federal Reserve Bank of Chicago President Austan Goolsbee has struck a cautious tone on the outlook for interest rates, emphasizing that cuts will only come once inflation is clearly moving back toward the Fed’s 2% target.

Speaking to business leaders in Washington, Goolsbee acknowledged optimism about the possibility of lowering rates later this year but warned against acting prematurely. He noted that progress on inflation has stalled, with core services—excluding housing—remaining stubbornly high. Cutting rates too soon, he cautioned, could risk overheating the economy rather than stabilizing it.

Despite these concerns, Goolsbee pointed out that the broader economy and labor market appear resilient. Consumer spending has been the main driver of growth, while hiring and firing remain subdued amid ongoing uncertainty tied to trade and tariff rulings. He dismissed the idea that productivity gains alone could be relied upon to tame inflation, stressing that monetary policy must remain vigilant until price pressures ease more decisively.

In short, the Fed is signaling that while rate cuts may be possible later this year, they will not be rushed. The priority remains ensuring inflation is firmly on track toward its long-term goal before easing financial conditions further.