Fed president warns inflation is 'going the wrong way' as tariff concerns mount

Core Viewpoint - The Federal Reserve Bank of Chicago President Austan Goolsbee expressed concerns about rising inflation and the potential for tariff-induced price hikes to become a persistent issue, particularly if stagflation occurs [1][3]. Inflation Concerns - Goolsbee highlighted that inflation has recently risen after a period of easing from the 40-year high reached in 2022, which raises concerns for policymakers [2][3]. - He noted that inflation has been above the Fed's target of 2% for over four years, and the recent upward trend is troubling [3][6]. Dual Mandate Challenges - The Fed's dual mandate to maximize employment and stabilize prices presents a dilemma, especially if both inflation and unemployment worsen simultaneously [6][9]. - Goolsbee emphasized that if inflation proves persistent, it would create a challenging scenario for the Fed, complicating its ability to meet its dual mandate [3][6]. Economic Forecasts and Tariffs - Goolsbee introduced the "11% lane" framework to assess the impact of tariff-induced price hikes, noting that goods imports accounted for 11% of U.S. GDP in 2024 [10]. - Concerns were raised about tariffs affecting intermediate goods, which could lead to broader macroeconomic impacts and increased production costs [11][12]. Services Inflation - The trend of rising services inflation could indicate that tariff inflation is not a one-time event, which would heighten concerns for the Fed [13][14]. - Goolsbee expressed that if services inflation continues to rise, it would be difficult to attribute this solely to tariffs, suggesting a more complex inflationary environment [14].