Austan Goolsby speaks in Jackson Hole on August 8, 2023.
David A. Grogan | CNBC
Chicago Fed President Austan Goolsbee on Sunday warned against misrepresenting the inflationary impact of corporate price increases and tariffs, a focus of the economic policy of the Trump-Harris campaign.
Goolsbee declined to comment directly on the presidential election. The Fed’s Commitment His insistence on maintaining independence and political neutrality comes during an election cycle in which voters have consistently ranked the economy and the rising cost of living as their top priorities.
As a result, Vice President Kamala Harris and former President Donald Trump have both made cost-cutting a driving force in their economic proposals.
Harris has proposed a federal ban on “corporate price gouging in the food and grocery industry,” which the Biden administration has repeatedly blamed on companies for keeping prices artificially high even as production costs fall.
Goolsby did not comment specifically on the Harris campaign’s proposal, but said price hikes cannot be explained solely by corporate profits.
“The difference between price change and cost change can vary widely across business cycles,” Goolsby told CBS’ “Face the Nation.” “So I would just caution everybody not to conclude too much from one observation on markups.”
Goolsby also explained the impact of higher tariffs, one of the key pillars of President Trump’s proposed economic plan, on inflation.
“Tariffs will increase prices,” he said. “The temporary increase in costs will increase prices, but they will not create long-term inflation.”
President Trump has repeatedly promised to raise tariffs across the board on all imports, with especially high rates on goods from China.
Economists cite the proposed tariffs as a key reason why Trump’s policies risk rekindling inflation, a notion that Republican presidential candidates have firmly rejected.
“Tariffs are a tax on foreign countries. … They’re a tax on countries that are scamming us and taking our jobs, and they’re a tax that doesn’t affect our country,” Trump said at a rally in Pennsylvania on Saturday.
Goolsby said tariffs don’t necessarily lead to long-term inflation, but they do raise consumer prices in the short term by making production more expensive.
“Whether you call it inflation or not, costs are going up, prices are going up,” he said.
Inflation has been declining slightly in the past few months since reaching very high levels in the summer of 2022. Last Wednesday, the annual inflation rate in the Consumer Price Index report hit its lowest level since March 2021.
But as Trump and Harris try to sell their economic policies to inflation-weary voters, investor attention is now focused on the Fed, with many hoping the central bank will cut interest rates in September amid growing fears of a recession.
The Federal Reserve prepares to hold its annual meeting in Jackson Hole, Wyoming this week, and markets will be hoping for signals of interest rate cuts.
Goolsbee, who currently has no voting power on the Federal Open Market Committee, stressed that the Fed is still considering its interest rate decision.
“Anything is always possible, a recession is possible,” he said. “The most recent GDP growth was better than expected so that was one bright spot, but you always have to worry about all eventualities. That’s the job of a central bank.”
