Federal Reserve’s Goolsbee warns of need for aggressive rate action as inflation sticks at 3.7%

Chicago Fed President Austan Goolsbee isn’t sugarcoating things. Speaking at the Official Monetary and Financial Institutions Forum in London on September 21, he laid out a case that the Federal Reserve may need to get significantly more aggressive on interest rates to wrestle inflation back toward its 2% target. With US inflation sitting at 3.7% as of July 2026, nearly double the Fed’s goal, Goolsbee argued that the central bank can no longer treat rising prices as a passing inconvenience. The timeline for hitting that 2% mark has been pushed back to 2027, a delay that speaks volumes about how stubborn this inflationary cycle has become. The demand problem the Fed can’t ignore Goolsbee’s core argument centers on a shift in the inflation narrative. For years, the Fed distinguished between supply-driven price increases (think tariffs, energy shocks, commodity disruptions) and demand-driven ones. The traditional playbook says you can look through temporary supply shocks. They resolve themselves. But Goolsbee is pointing out that these supply shocks haven’t been temporary. Tariffs, energy costs, and commodity prices have created a persistent baseline of upward pressure. Layer demand-s...