Chicago Fed's Goolsbee, Atlanta Fed's Bostic see case for patience before cutting interest rates
- - Chicago Fed's Goolsbee, Atlanta Fed's Bostic see case for patience before cutting interest rates
Jennifer SchonbergerAugust 13, 2025 at 2:32 PM
Chicago Fed president Austan Goolsbee and Atlanta Fed president Raphael Bostic on Wednesday both said they'd prefer to gain more clarity around the impact tariffs have on inflation before determining whether to cut rates.
Goolsbee said he's waiting to see whether tariff-induced inflation could prove persistent. Likening tariffs to "throwing dirt in the air," Goolsbee said he's trying to figure out whether inflation and employment are still moving toward their goals of 2% and maximum employment, respectively.
"If you start seeing prices go up and you start seeing employment go down, because tariffs, in my view, are a stagflationary shock, it makes both sides of the mandate go bad at the same time, and that's the worst position that a central bank could be in because there's not an obvious answer of what you do," Goolsbee said at an event in Springfield, Ill.
Goolsbee cautioned that if we get more data like the latest Consumer Price Index report, which showed "core" inflation — which excludes volatile food and energy prices — rising on account of higher goods and services prices, that would be concerning.
"Services are not tied to the tariffs," he said. "Everyone is hoping that's just a blip. There's noise in the data. If you start to get multiple months where the components suggest that the impact of tariff inflation is not staying in its lane, that would be more of a concern.”
Core inflation rose 3.1% over the prior year in July and rose 0.3% from the prior month, the most in six months.
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
Speaking at a luncheon in Alabama on Wednesday, Bostic noted that a 4.2% unemployment rate remains historically low, suggesting the balance of risks remains tilted toward inflation. In other words, with inflation above the Fed's target and tariff impacts uncertain, there remains a case for the Fed to wait.
July's jobs data, which showed a slowdown in hiring and sharp downward revisions to prior months, raises the possibility that "maybe the risks [between inflation and employment] are more imbalanced and we should be thinking about our ability to be patient as much less than it was before," Bostic said.
In July, the US economy added 73,000 jobs, while job gains for May and June were slashed by a total of 258,000 due to revisions. This brought the three-month average payroll gain down to a mere 35,000.
As of Wednesday, markets were pricing in a near certainty that the Fed will cut rates in September. Since the central bank's July 31 decision to leave rates unchanged, some Fed officials have called for the Fed to act next month.
"Before September, as we go into the fall, these are going to be some live meetings and we're going to have to figure it out," Goolsbee said. "The hardest thing that a central bank ever has to do is try to get the timing right when there are moments of transition."
Chicago Federal Reserve president Austan Goolsbee speaks to the Economic Club of New York in New York City on April 10, 2025. (Reuters/Brendan McDermid/File Photo) (Reuters / Reuters)
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