Chicago Federal Reserve President Austan Goolsbee said Friday that he still anticipates interest rate cuts, though he acknowledged growing risks to that outlook.
Speaking just two days after he and other Fed officials voted to keep short-term interest rates unchanged, Goolsbee told that he has been hearing increasing concerns from businesses in his district about tariffs and their potential to drive up prices while slowing economic growth.
“When you got a lot of uncertainty, I do think you need to wait to see some of these things get cleared up on the policy side,” Goolsbee said in an interview.
“I’m out talking to business people and civic leaders throughout this region, and there’s been a decided turn in these conversations over the last six weeks, of anxiety, of pausing, waiting on capital projects, capex, etc., until they figure out tariffs, other fiscal policy.”
Despite this uncertainty, Goolsbee maintained his expectation that interest rate cuts are coming, even as the Fed takes a cautious, wait-and-see approach amid developments surrounding President Donald Trump’s tariff policies, deregulation efforts, and tax plans.
“If we can continue to make progress on inflation over the long run, I believe that rates 12 to 18 months from now will be lower than where they are today,” he said.
Austan GoolsbeeNew York Fed President John Williams also spoke Friday morning, emphasizing the high level of uncertainty surrounding economic decision-making, particularly regarding inflation.
“Recent data — both hard and soft — are sending mixed signals. Measures of policy uncertainty have increased sharply in recent months,” Williams said during a speech in Nassau, the Bahamas.
Both Goolsbee and Williams joined the Federal Open Market Committee (FOMC) in voting to hold the benchmark federal funds rate steady within a target range of 4.25%-4.5%.
In its post-meeting statement, the FOMC highlighted that “uncertainty around the economic outlook has increased,” a sentiment echoed by Fed Chair Jerome Powell, who used the word “uncertainty” 10 times during his post-meeting press conference.
A key question that has surfaced recently is whether the U.S. economy is heading toward stagflation—a combination of slow growth and rising inflation.
“Tariffs raise prices and reduce output. So that’s a stagflationary impulse, which is different from saying this is stagflation,” Goolsbee explained.
“The unemployment rate is barely 4% and inflation is in the 2s. So the hard data that we start from is not the stagflation of the 1970s. It’s just the … the uncomfortable environment is when it’s moving directionally the wrong way.”
FOMC participants upheld their forecast for two interest rate cuts by the end of 2025. However, financial markets are anticipating a more aggressive approach, pricing in the equivalent of three quarter-point rate reductions, according to CME Group data.