Goolsbee Says Inflation Must Ease Before Fed Cuts Rates

Chicago Federal Reserve President Austan Goolsbee said the U.S. central bank needs clearer progress on inflation before it can cut interest rates this year. He said higher energy prices, driven by the war in Iran, have made the near term more difficult for policymakers who were already trying to bring inflation back to the Fed’s 2% target.

Goolsbee made the remarks in an interview with PBS NewsHour that aired on March 24. He said rate cuts would only be realistic if inflation resumes moving lower and officials gain more confidence that price growth is on a path back to target.

His comments add to the market’s growing view that the Fed may stay on hold longer than expected. Although policymakers left rates unchanged this month and still projected at least one cut later in 2026, recent inflation risks have made that path less certain.

Energy prices complicate the inflation outlook

Goolsbee pointed to energy as the immediate problem. He said the latest jump in oil prices could push inflation higher at a time when the Fed has not fully worked through the previous inflation shock. That makes it harder for officials to justify easier policy soon.

The concern comes as the conflict in the Middle East continues to lift oil prices and raise worries about broader cost pressures. Reuters reported last week that Fed Chair Jerome Powell also flagged tariffs and energy prices as factors keeping inflation elevated.

As a result, traders have scaled back expectations for near term easing. The Fed’s inflation challenge now looks less tied to fading domestic demand and more tied to fresh external pressure from energy markets. That shift has made officials more cautious in their public comments.

Fed officials keep a cautious tone

Goolsbee’s latest remarks do not mark a full policy shift, but they do reinforce a cautious message he gave a day earlier. Reuters reported on March 23 that he had already described inflation as the bigger risk and said he was watching inflation expectations closely.

Other Fed officials have sounded similar. Fed Governor Michael Barr said on March 24 that rates may need to stay steady for “some time” because inflation remains above target and policymakers still need clearer evidence that price pressures are easing.

For now, the message from Fed officials is straightforward. Rate cuts remain possible later this year, but only if inflation improves. Until then, rising energy costs and stubborn price pressure are likely to keep the Fed in wait and see mode.