Austan Goolsbee, president of the Federal Reserve Bank of Chicago, addressed stagflation concerns at the Aspen Ideas Festival. He highlighted stable employment at nearly 4% and inflation at 2.5%, arguing that recent supply shocks like tariffs are unlikely to lead to a return of 1970s-style stagflation. He acknowledged the potential for simultaneous inflation and unemployment issues but did not provide definitive forecasts. The Federal Reserve is committed to maintaining high interest rates until inflation aligns with its 2% target, despite external pressure to lower rates, emphasizing the need for tangible improvements in inflation control.
There's definitely the possibility of both things getting worse at the same time, referring to inflation and unemployment. And there you usually say, well, how long is each side's discrepancy going to last?
Despite mounting pressure from markets and President Donald Trump to cut rates, Jerome Powell, chair of the Federal Reserve, has said the agency needs to see stronger evidence that inflation is firmly under control.
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