Chicago Fed chief warns path to 2% inflation will be painful

Chicago Federal Reserve Bank President Austan Goolsbee warned on Monday that returning inflation to the central bank's 2% target will require economic pain for workers, arguing that a sustained wave of supply shocks can no longer be dismissed as temporary. Speaking at an Official Monetary and Financial Institutions Forum event in London on September 21, Goolsbee said supply shocks have become more frequent, hit harder and lasted longer, citing oil prices hovering near $100 a barrel following the war in Iran, repeated tariff escalations and pandemic-era supply chain disruptions. Because monetary policy works by reducing demand rather than boosting supply, he said, bringing inflation down means pushing employment and output lower. "This is exactly the painful tradeoff between employment and inflation that stagflationary shocks always impose on a central bank," Goolsbee said in his prepared remarks. "Unfortunately, in environments like that, the only way back is the hard way." In remarks to reporters afterward, he was more direct: "It's going to be painful. It would necessarily be painful.