Fed’s Goolsbee: No playbook for tariff shock, rate path uncertain but likely lower

Speaking overnight, Chicago Fed President Austan Goolsbee said that nothing is “off the table”, including rate hikes, cuts, or holds. The sheer scale of recent trade developments creates a stagflationary shock, and there is “not a generic playbook” for how a central bank should respond to.

Also, Goolsbee noted a key challenge: the data being released now may not yet fully reflect the evolving reality on the ground. That’s why he believes Fed must closely monitor both hard data and soft indicators, especially as lag effects complicate interpretation.

Despite the tariff-related uncertainty, Goolsbee still sees rates trending lower over the next one to two years. Nevertheless, he stressed that should long-run inflation expectations begin to drift, “any central bank almost has to address that… regardless of what the other conditions are.”