
“We’ve got to be more careful and prudent of how fast rates could come down,” says Chicago Fed chief
“We’ve got to be more careful and prudent of how fast rates could come down,” says Chicago Fed chief

Last week, monetary policymakers at the Federal Reserve voted to hold interest rates steady, saying growth and the labor market both looked “solid,” but the economic outlook was “uncertain.” While inflation has trended down toward the Fed’s 2%-a-year target, the road to get there has been bumpy and the tariff policy of the new Donald Trump administration threatens to stall that progress (or even reverse it).
Chicago Fed President Austan Goolsbee is one of the Fed officials who vote on interest rate policy this year. He spoke with “Marketplace” host Kai Ryssdal about the state of the economy and how he’s looking at navigating uncertain conditions right now.
The following is an edited transcript of their conversation.
Kai Ryssdal: I want to talk not about the tariff elephant in the room, but sort of the thing that goes along with that, and it’s been the subject of a lot of conversation, obviously. [Fed Chair Jerome Powell] talked about it last week, and your colleague Susan Collins talked about it on CNBC this morning. And that is uncertainty. What we seem to have here is a whole lot of induced uncertainty into this economy. And I wonder how you at the Fed are thinking about that as that affects businesses and everyday consumers.
Austan Goolsbee: Well, I’m not allowed to speak for anybody else, just me. How I think about it is the law is pretty specific about what the, how the Fed is supposed to set monetary policy: Stabilize prices and maximize employment. So uncertainty about things that are going to affect prices, we basically have to think about them, even in the space that we’re mostly uncomfortable weighing in on fiscal policy matters. That’s a thing Congress, the president, they should decide that. But then we do have to react because it’s right in our wheelhouse.
So I think these uncertainties likely mean that in what was otherwise shaping out to be a pretty good progression, in my view, of the economy getting back to 2% inflation, strong growth, strong productivity growth, and a labor market that looks pretty close to full employment. Now we’ve got to be a little more careful and more prudent of how fast rates could come down because there are risks that inflation is about to start kicking back up again.
Ryssdal: Let me ask you, then, if you think it’s, you know, you all — and again, I’m not asking you to speak for anybody but, but Austan Goolsbee — but you in the collective always say, you know, “We do monetary policy, fiscal policy makers do fiscal policy.” That is to say, Congress and the White House, taxing and spending. Do you think it’s realistic to try to keep those separate now anymore? They do seem to be ever more intertwined.
Goolsbee: They’re definitely intertwined in the sense that they’re affecting the base conditions. But Kai, what I always say out here in Chicago, our thing is, “There’s no bad weather, only bad clothing.” You tell me the weather, I’ll tell you what jacket we’re going to put on. And these fiscal choices, if they affect prices or employment, the law requires us at the Fed to think about them. That’s different from us weighing in on fiscal policy. We’re not saying what’s a good idea or bad idea. We’re just saying, we have to do our jobs, and part of our job is, if something’s threatening to affect prices, we’ve got to run through the scenarios and think it through.
Ryssdal: As those prices get affected by the tariffs or what have you, just to generalize it, what part of the current economic environment are you most worried about? Are you most worried about inflation, which you guys have been fighting for years now and seem to have a hold on? Or are you worried about what might happen with growth, right? Because if you have inflation with growth that slows, as it has in the past because of tariffs, what do you do?
Goolsbee: Yeah, thanks for bringing up such a painful scenario.
Ryssdal: It’s my job.
Goolsbee: Look, we have to think about both of those in the uncertainties of this exact moment. I do think you’ve seen growth continue to come in pretty strong. The consumer — very strong, not slowing down. And so there are concerns about what’s happening with inflation and this muddying of the water. Normally, we’re watching inflation to get a sense of is the economy overheating, in which case monetary policy might, might want to act. It’s going to be hard to tell the difference between a sign of economic overheating and a sign of this is just a temporary result of an escalating trade war or of some other geopolitical thing that’s happening. And if you’re one of the data dogs, which, Kai, I know you are and I am, it’s hard to sniff! You know you got blankets over the thing we’re trying to sniff out, what’s the, what’s the through line, and we might have to slow the pace of getting to the settling point if we have that much uncertainty.
Ryssdal: I absolutely do not want to put words in your mouth, but to a layperson listening to you right now, and most of the audience of this program are laypeople, is laypeople. You are using words that, to an attentive observer, sounds like you’re expressing some real concern. Correct me if I’m wrong.
Goolsbee: I’m always concerned. If you say, what keeps me up at night, my view is the central bank’s job is not to sleep at night. We’re, we’re on the night shift. So I am always concerned about anything that’s going to raise prices or knock us off the employment track. Our 7th District out in Chicago is the heart of the Midwest, is really the district, and we have the highest manufacturing of all the Fed districts and by far the highest auto production. So I’m out talking to industrial executives. I’m going to Detroit on Wednesday to meet with a large number of folks from the, from the auto industry. And I gotta say, the concerns that I have are in large measure coming from the businesspeople that I’m talking to. Not everything is bad. I want to emphasize, we’ve had very strong productivity growth, which is a positive, and what matters is everything taken together. But I do have to tell you, when I’m out talking to people participating in the economy, this is on their mind.
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