Fed’s Goolsbee warns supply shocks are forcing painful trade-offs in the inflation fight

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, delivered a notably candid message to a London audience this week: the era of clean, textbook inflation management is over, and the Fed knows it. Speaking at an Official Monetary and Financial Institutions Forum event on September 21, Goolsbee argued that central banks can no longer treat supply-driven inflation the way they treat demand-driven inflation. The problem is that ignoring repeated supply shocks entirely risks letting inflation expectations drift, while fighting them aggressively risks crushing jobs. Neither option is comfortable, which is precisely the point. A harder road than the last mile US inflation came in at an estimated 3.7% as of July, still well above the Fed’s 2% target. More troubling for policymakers, forecasters have pushed back their expectations for when inflation might peak, with some projections now stretching into 2027. Goolsbee’s diagnosis of the problem centers on the nature of supply disruptions since the pandemic. They have become more frequent, more severe, and longer-lasting. Tariffs, energy price volatility, geopolitical conflicts, and fractured supply chains have compounded on ...