Chicago Fed President warns prolonged U.S.-Iran tensions could embed inflation expectations, complicating monetary policy.
Chicago Fed President Austan Goolsbee has identified the U.S.-Iran conflict as an emerging inflationary shock, driven by rising oil prices. While employment and growth remain unaffected so far, sustained price increases could pose risks to the economy.
Goolsbee noted that the situation has not yet triggered stagflation but warned that prolonged inflationary pressures could feed into broader expectations. Supply chain disruptions linked to the conflict are also a growing concern, with potential spillover effects on core services prices and wage growth.
The Fed remains divided on inflation and labor market outlooks, with all policy options still under consideration. Goolsbee emphasized that persistent inflation signals would be “extremely problematic” for the central bank’s efforts to stabilize prices.