President, Federal Reserve Bank of Chicago
Chicago FED President breaks down the Economy | Austan Goolsbee talks with Chuck Todd...
Chuck sits down with Chicago Fed president Austan Goolsbee to get his read on the U.S. economy, then talks with Semafor's Ben Smith about Washington's growing role in the global financial conversation.
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About Austan Goolsbee
Austan Goolsbee, president of the Federal Reserve Bank of Chicago, has recently expressed increased concern about inflation, stating that progress on disinflation has stalled and that the inflation rate is now rising. In multiple interviews in May and June 2026, Goolsbee noted that inflation has been above the Fed's 2% target for five years, and that after a period of progress, the improvement stopped last year and has recently deteriorated. He pointed to "warning signs" in services inflation, which he described as "high and rising" and not attributable to temporary factors like tariffs or oil prices. Goolsbee said he dissented from a rate cut at the last meeting of the previous year, feeling it was too early, and that he does not regret that position. He stated that the job market has been "stable without being good" and that, given the inflation picture, it "behooves us to take a serious look at what's happening on the inflation side." On artificial intelligence, Goolsbee said in late May 2026 that while AI is "coming in fast" and will be "massively transformational," he does not expect rapid job losses, citing industries where the "oops factor" makes AI unreliable. He advised that health care is likely to remain a secure industry due to an aging population. Regarding the Federal Reserve's communications, Goolsbee expressed skepticism about the use of forward guidance and "committing three years ahead forecasts," and welcomed a communications task force organized by the chair. He also commented on incoming Fed Chair Kevin Warsh, saying he expects Warsh to bring "a lot of new ideas on monetary policy" and that it is "good" to have new ideas, while declining to specify a preferred direction for reducing the Fed's balance sheet.
Transcript (45 segments)
Z
Zack Guzman0:00
Austan Goolsbee, good to see you. Zack, lovely to see you. And I will say up front, you're a former political guy, but...
A
Austan Goolsbee0:07
Former, exactly. I'm out of that business.
Z
Zack Guzman0:11
President of the Chicago Fed. Let's do a little before I get into the nitty-gritty. Give me what is the job 101? Like what is of the Fed? Of your job?
A
Austan Goolsbee0:21
Mine. President of the Chicago Fed. So, a lot of people like why does Chicago even have a Fed? Like why isn't the Fed in DC? There are 12 Reserve Banks spread around the country as well as the Board of Governors in DC because in 1913, just like today, people were deeply uneasy that the federal government alone or the federal government plus banks on Wall Street would control the whole US financial system and not have input from the rest of the country. So, they created these 12 banks purposely to generate a form of independence, independent thought, and you see it when we come and we sit around the table, and it's a gigantic table, and for econ nerds, it's the coolest table in the world. They come from very different perspectives. I was an economist from the Midwest. There are markets people, business people, financial people all come there with a different perspective trying to figure out interest rates and follow the law. And our law says stabilize prices, maximize employment. This whole enterprise is only one part of the job. However, it may be the most public, but the other things that we do at Chicago Fed, we are kind of a bank to banks, and they have accounts only in the region. And so all the cash, yeah, heart of the Midwest. It's mostly Iowa, Wisconsin, Illinois, not Ohio, Indiana, Michigan. Those five states. And then that's going the other way, and so all the cash in the economy is printed by Bureau of Engraving and Printing, but distributed through us, and we do $6 trillion a day of wire transfer payments on a rail. We run the plumbing of the financial system, essentially. And we supervise banks to make sure they have the capital they say they have, they're following the consumer protection laws. And we're members of the community. We're out gathering intelligence as well as engaging community development.
Z
Zack Guzman2:43
And obviously, your region heavy ag, heavy autos, heavy manufacturing. Most manufacturing intensive of all the districts, which makes us a little bit the canary in the coal mine of the business cycle. So, a lot of times even the other regions, everybody's kind of fiercely defensive and loves their district, but people do want to know, well, what are we hearing in the 7th District because they're more cyclical. And the leading indicator. And at the regulation side, yes, your regulatory day-to-day job is the banks. Is that fair to say?
A
Austan Goolsbee3:17
Is the banks that and the ones that we supervise. If you get down in the weeds, banks can be state chartered or nationally chartered and etc., but our member banks or the bank holding company, the Fed oversees them, and we have hundreds of people working in supervision who are going down there to make sure we don't set the policy. That's set in Washington, but we enact and oversee that they're doing what they're supposed to.
Z
Zack Guzman3:47
Let's get into the nitty-gritty. I had Danny Yergin on this program 2 weeks ago. You know, basically the guy, I like him. This guy knows about energy. And he said this is worse than the 70s energy shock. And that Danny Yergin said it's worse than the 70s.
A
Austan Goolsbee4:02
And that but we haven't felt it yet. Okay. He is...
Z
Zack Guzman4:06
No, I was curious the fact that you're reacting the way you're reacting. Do you think he's onto something? Do you hear similar concerns?
A
Austan Goolsbee4:17
I haven't heard concerns like that. Now, we're not that big of an energy producing region. The Dallas Fed is kind of the most famous for that. We're a lot of users of petroleum products, especially agriculture, manufacturing. There's been a lot of worry, angst, concerns expressed about the uncertainty of the war, how long is this going to last? But the markets, at least if you look at like oil futures, where do they think prices are going to be 6 months from now? They're still expecting them to be down. It sounds like Yergin is not there. He thinks the supply disruption's going to be more persistent.
Z
Zack Guzman5:07
Two weeks ago we had a hot war, and it could be bad. That uncertainty, the question is all about how persistent is this going to be, and I don't think we have clarity on that topic yet, and it matters a lot. If you thought mostly this is going to be gone in 6 weeks, the proper Fed answer to a 6-week shock, it's going to drive people crazy for 6 weeks, but the Fed should look through that because it's just temporary. If you told me the price of oil is going to be $120 a barrel for the next 2 years, now I got to recalibrate. What is going to be the impact? Secondary impact. April 28th, end of April. So, that's...
A
Austan Goolsbee5:56
It is hard to imagine that it'll be fixed by then.
Z
Zack Guzman5:59
Or that you will feel that there's any clarity, right? So, it's more likely you're in a reading of more fog. Is that fair?
A
Austan Goolsbee6:06
That's what, before the war began, we were still waiting for the tariff inflation to go away, and there was a little bit of argument. It was lingering. I felt it was lingering. But I remained one of the more optimistic folks on the committee that it would go away, we could get back to 2% inflation, and that we could have multiple rate cuts in 2026. That this thing is past 7%, and that this thing happened before that thing faded away, that raises a little bit of indigestion. I'm not necessarily throwing up in my mouth, but I'm getting a little... this could start looking like a persistent shock not unlike you remember when the first team transitory and they said, 'Yeah, the inflation in 2021 is about to go away. Don't worry.' And then we had the first shocks. Russia invades Ukraine, the price of oil goes up, we get another set of shocks, and there was a receding, but it hadn't finished, and then people started saying, 'Wait a minute, this isn't transitory at all.' If we get back into that dynamic, it's a very difficult dynamic. Let me though go on the optimistic side here because there's been a resiliency in our economy and the global economy, and it has been dealing with shock after shock.
Z
Zack Guzman7:40
Well said.
A
Austan Goolsbee7:41
And there's a point where like is this, it frankly performs better than any of us. You're totally right. If we got out your own whiteboard and just like went through the numbers, this is going to be how we're... Look, what we're missing is the main, strongest, most resilient driver of the US economy for the last 3 years has been the US consumer. It's not data centers, it's not AI, it's not any of those. If the consumer kept chugging along based on they had jobs, the high end has been more, but you cannot get 2.5, 3% solid growth in consumption without it being broad-based. If you sit down with the numbers, it's not just the 1%. They might have done the best. And AI data centers have been especially strong, but that's not the main engine. The main engine's been the consumer. As long as that stays true, that the consumer chugs along, we're basically going to be fine, but if that's in danger, which it could look when oil prices go up, the University of Michigan survey, the most recent one, sentiment lowest ever. They didn't exist in the 70s, so you don't... They switched over to... We got a lot of... their chief economist is on Chicago Fed advisory committee, and they're in our district, so we follow them a lot.
Z
Zack Guzman9:21
Right.
A
Austan Goolsbee9:22
At one point they switched over to being internet-based, and when they went full internet, people are crankier on the internet, so everything kind of went down a few points. There's a little bit of, you know, you sort of... It's not skepticism, but it's like let's not overreact. I was predicting the second the price of oil went up, I said, and you could check it. I'm not just Monday morning quarterbacking there. I said I would not be surprised if we see a plunge in consumer confidence. That has often happened when this very public price goes up. But if that turns into a drop in spending, we got problems. But there hasn't been the last 5, 8 years, as you're hinting, those two things have broken apart. So, we just have to watch to see is that getting worse?
Z
Zack Guzman10:17
About your the two sectors that are your canaries in the coal mine. I want to start first with that too. Because the other big issue it was something that Daniel Yergin brought up earlier. He goes, 'Fertilizer.' He's not wrong. He's not wrong. And I had David Miliband on last week and he's petrified of all sorts of humanitarian problems and all their own food contracts that they're draining. So, this fertilizer issue is...
A
Austan Goolsbee10:42
Fertilizer in the... and it couldn't have come at a worse time for agriculture. Before this ever was, when we were in the tariff space, people's hair's on fire in the 7th District as we're going around. We went to Cedar Rapids, Iowa, where heavy agriculture economy focused. The sales price of their product was kind of suppressed. The cost of their inputs rising dramatically, so their farm income getting squeezed, and then the tariff retaliations, their main markets were drying up. The Chinese start buying soybeans from Brazil. So, they were dealing with that, trying to get out the back end of it. Now, for the price of oil, I'm telling you, this thing is an extended basis at these kind of prices.
Z
Zack Guzman11:39
Extended. I know you're hesitant...
A
Austan Goolsbee11:41
You know, more than a month or two months. Something that diverges, if we had a graph and could plot out, here's what Wall Street's oil futures say they think the path of oil is going to be. Anything that's above that over the next 6 months, there's really going to be a squeeze because there wasn't much margin of error in agriculture to begin with. If the fertilizer prices go like this and then it starts spilling over into manufacturing prices of their machinery, which we can talk about in a second how the manufacturers reacted.
Z
Zack Guzman12:23
Right. Food inflation is going to go up. It's already started, but it's going to go up and it's going to drive folks crazy when they find out the Fed, for the most part, when we're thinking about inflation, excludes the price of energy and the price of food and we look at core inflation. And my mom goes crazy. What are you talking about?
A
Austan Goolsbee12:43
The reason we do that is because these two categories are much more variable. So, the core inflation tends to be the better read of what's the long-term threat, but it's going to be uncomfortable and you saw it when Joe Biden was the president in '21 and '22 going into '23, food inflation high, people go to the grocery store and get sticker shock and they're upset and it is reflected in what they say.
Z
Zack Guzman13:18
Look, we're at Semaphore and our friend Ben Smith did a piece last week noting Larry Summers' warning that this inflation issue was not going to... and he said this a couple of years ago. And he was because he thought the pattern was going to follow the '70s pattern. Are you concerned about that?
A
Austan Goolsbee13:40
Eh, concerned? Oh, what is... I thought at the time when Summers said that, he ended up being right about inflation, but not for the reason... his reasoning, I think, has been proven not to be accurate. His view was it's all about an overheated economy and so if you remember, at that time he said it will require to get inflation to come down would require 6% unemployment for five consecutive years before you would see any progress. And that proved not to be true. We made a lot of progress in '23 getting the inflation rate down and there was no recession. That said, if you have extended inflation, that definitely showed us people do not like inflation. They don't like prices and as we're going around the district talking to businesses or ordinary people, you hear about affordability, the cost. We want to make XYZ product, but now our suppliers are telling us they're going to jack up the prices 10%, 20%. If we're going back to a world where the costs are out of control, then I'm going to be nervous about what's the consumer's impact.
Z
Zack Guzman15:07
Do you monitor small business startups? Because I know sometimes in a bad employment economy, small business startups actually go up.
A
Austan Goolsbee15:15
Go up because people are... and they're not a lot of times in the short run they're not counted in the statistics.
Z
Zack Guzman15:21
Right. So, I'm curious how you look at small business because they're the ones feeling this pinch first.
A
Austan Goolsbee15:28
They feel the pinch first. And the self-employed, we got so many more gig workers. With some... you kind of look, I always say when I first got to the Fed, there's a big thing of are you a hawk? The hawks want high rates, the doves want low rates. And so, there's this pigeonholing, but are you a hawk or a dove? And I always said, I don't aspire to be a bird of any kind. I just wanted to be one of the data dogs. And the first rule of the data dogs is sniff everything that hits the floor because it might be food. And so, I think the only answer when the data are in there are questions about it is get a whole bunch of other series and see if there's a collective answer. So, for small business, there are many ways they don't show up in the official data except with a lag. So...
Z
Zack Guzman16:22
Because it feels like a bad time to start a small business.
A
Austan Goolsbee16:26
Maybe. I, you know, that's why I'm asking. And yet, coming out of COVID, if you just look at in some states you have to get a license. You want a corporation, you get a license. So, you can look at startup activity. Record levels of new startups and you get the sense like are these the mammals and like the dinosaurs are all going to go extinct after the meteor hits? I don't know. I do think the rise of gig work and side jobs that started in COVID, a rebalancing of people saying, 'Hey, I don't want to do this for all my life. I'm going to start something new.' Monitoring private sector sources is kind of the only way to do it plus the... Is it anecdotal? Maybe it's anecdotal. Us just getting out on the road driving from town to town meeting with chambers of commerce, the Grand Rapids business journals of the world, you hear a lot about small business in those cases and a lot of times they're more current than the data, which come out with a lag, and they give you something to look for. Let's talk about manufacturing.
Z
Zack Guzman17:34
Yeah. Obviously, we've had three, four presidencies in a row that have said, 'We're going to jump-start manufacturing in America.' Easier said than done. How's it holding up in this high tariff environment?
A
Austan Goolsbee17:48
So, it depends. Manufacturing's not all one thing. So, it depends a lot which sector you're in. So, let's take autos. Okay, autos, big durable good. So, interest rates and what the finance conditions are matter. Price of oil matters for the demand for autos. And one of the leading auto executives phrased it this way. It was at the very beginning of the war, price of oil went up. He said, 'They're trying to figure out how long is this going to last? If it lasts too long,' he said the thing to remember is almost all manufacturing now is just-in-time manufacturing. So, all the parts and components are not sitting in a warehouse. They're on a truck being shipped and that truck's got to use gasoline. And so, if the price of gas goes up $5 a gallon for a year, their supply chain is going to be disrupted and affected. So, I think there's anxiety/concern that they express. They had come to terms and kind of figured out not ways around the tariffs, but as long as USMCA compliance stuff was exempt, as long as we backed off from the highest level of the tariff rates, it wasn't going to be as big as what they feared. And it's worth remembering imported goods are only 11% of GDP in the US. So, there is a sense in which as long as tariffs stayed in their lane, they might not have that big of a macro impact. But how does it jump out of its lane? One is if you start applying the tariffs to the components and supplies, now it just got turned into a tax on domestic manufacturing. And they're concerned about that version of that happening with oil prices.
Z
Zack Guzman19:43
Let's talk about that Board of Governors meeting. How public should it be? I don't know with J. Powell. I see it like, how transparent. He has engaged in more transparency than we've ever had. Increased transparency from Alan Greenspan, then Janet Yellen, and I mean, I think we're getting there with more and more transparency. Do you think that room would give people more confidence in what you guys do, or do you think it would actually, you know, people would misinterpret data?
A
Austan Goolsbee20:18
Probably yes, you know, all of the above. I will say the fact that we release detailed minutes of what was said at the meeting, and then with a lag, they will release word-for-word transcripts of what everyone said, I do think has been a bonus to the Fed. The demystification of the Fed, when I first started, I went and looked up the poll, and a big majority of Americans said they were familiar with the phrase Federal Reserve. But they knew either nothing or close to nothing about what it does. And simultaneously, an even bigger majority said they thought the Fed was doing a bad job. Okay, they don't know what the job is, but they're screwing it up. Demystification, what the Fed does, and explaining we aren't the bad guys, we are the guardians of the galaxy. Fed 101 is super important. If it was literally live-streamed, I don't know, then it might be... one of the great things about the Fed, if you look at the transcripts, you will see everyone around that table takes the job intensely seriously. It's not about elections, it's not about anything but the economic conditions and outlook. And if the more playing to the camera it was, would it still retain that mission-driven? I hope so, but that's what I'd be nervous about. I don't believe in cameras in the courtroom for that. Yeah, and it's the same idea, same idea. That doesn't mean I don't like audio. We should have a transcript, we should have an audio, and we should be transparent, but...
Z
Zack Guzman22:07
How much does the political pressure... How do you guys push it out? Is there... I mean, if...
A
Austan Goolsbee22:14
We have to, by law. No, we don't... we do... you look at the transcripts, and you'll see we don't... Everybody keeps their head down. I always say, Chicago Fed motto, there's no bad weather, only bad clothing. We get the conditions, we put on the jacket that is warranted. And all of what happens in Washington, or in the stock market, or in the public press, all of those are the conditions that I try to pay attention to. When there are critiques of the Fed, I try to take that seriously, and get to the bottom of what is the argument. Are we wrong? The panel is both Ron and Rand. Audit the Fed. Audit the Fed.
Z
Zack Guzman23:03
What does that mean, and do you think it's a fair critique?
A
Austan Goolsbee23:06
One part of it is totally not fair critique, and one part is fair. The part that's fair is the Fed should be audited, is audited. We have literally more than 60 system-wide audits. They're general audits of every Reserve Bank, of the financial system, of national IT, of all different parts of the Fed. The part that is controversial in the Audit the Fed bill is it's not about oversight of budget, it's about audit the monetary policy decision, and should the political sphere be able to set the interest rate. That's... if you want inflation to come roaring back, that's how you do it. Turkey, exactly. Zimbabwe. Any place where the Central Bank is not independent of meddling, where the people sitting around the table, I don't know what their tables are like, but if the people sitting around this table are looking over their shoulder and saying, well, here's what the White House wants the interest rate to be, inflation's going to come back. Any place where it has that feature, the outcomes are worse.
Z
Zack Guzman24:27
You used the phrase low hire, low fire. That is certainly it feels like we are stagnating here. It's not a growth mindset. I know how I would be running a company right now. I would be like, well, I'm not sure how many heads AI will replace. Let me figure this out. So, to me it makes sense that we're in this...
A
Austan Goolsbee24:46
I 100% agree. It's sort of like it feels rational. I think it is rational. So, how long do you think we're going to sit in this space? Kind of for as long as there is this uncertainty. So, at a high level, I think the job market is stable without being good. Okay? So, it's not good, but it's not getting worse. It's really hard. The hiring rate is low, as low as it normally is in the depths of a recession. But we're not in a recession. But the layoff rate is also low, as low as it normally is at the peak of a boom. So, the weird thing is, why is that both happening at the same time? And I have thought the same as your intuition, it's because of uncertainty. That doesn't characterize the business cycle. Usually, they move in opposite ways. In uncertainty, you would sit on your hands, and you say, I definitely don't want to hire anybody, but I don't want to let go of all my people, because what if it's resolved in the next 6 weeks, and it's fine, and we're going back and the consumer just keeps chugging along, and then we would deeply regret not having enough people. So, I think that goes until it can't go. And the more uncertainty we have, the more in the history of there's low hiring and low firing, maybe it will be even lower hiring and lower firing.
Z
Zack Guzman26:12
What is full employment now? I operated for the longest time at 5%. It was five, and then at some point it was six and five, now it's four, 4.3, something. What do you guys operate at?
A
Austan Goolsbee26:23
We, you can look, if you're really into this kind of thing, they put out this statement of economic projections, which they call the dot plot, and every member anonymously says, what do you expect the interest rate, the inflation rate, unemployment for... it's a real clear politics average, but they ask not just next year, and the year after, then they ask in the long run. That to me is a pretty decent what people's head is of what long-term unemployment, and I want to say the median's probably around 4.3 or 4.5. We're around that. But it's been inching closer to five. I don't know that it has. It has been inching up from record low levels in the threes. But now we've been bumping along on every measure. I call the four horsemen of the truth in the labor market are no longer the number of jobs created in the month, because now there are a lot of question marks about that. The unemployment rate, the hiring rate, the vacancy rate, the layoff rate. That's what you care about now. Those are the best indicators of where we are in the business cycle. They don't all say the same thing, like hiring and layoffs saying opposite, but they've all four been pretty stable. And so, that's why I say the labor market is stable without being good.
Z
Zack Guzman27:55
Well, we got to get our kids some jobs. Yeah, we got to get some jobs. Yeah, Chuck, great to see you, guy.