Chicago Federal Reserve President Austan Goolsbee on Sunday cautioned against the oversimplification of inflationary drivers, particularly corporate price increases and tariffs, which have become central themes in the economic strategies of the Trump and Harris campaigns.
While Goolsbee refrained from directly addressing the presidential race due to the Federal Reserve's commitment to political neutrality, his remarks come at a time when economic concerns, particularly the high cost of living, dominate voters' priorities, CNBC reported.
As part of their election campaign, Vice President Kamala Harris and former President Donald Trump have both pledged to reduce costs for Americans.
Harris has introduced a proposal to ban "corporate price-gouging in the food and grocery industries," similar to the Biden administration's stance that persistent high prices are partly due to companies maintaining elevated prices despite declining production costs.
Goolsbee, however, suggested that attributing high prices solely to corporate profit motives is an oversimplification.
"The relationship between prices and costs can fluctuate significantly throughout the business cycle," he said on CBS' 'Face the Nation'.
Turning to tariffs, a key component of Trump's economic plan, Goolsbee clarified that while tariffs do lead to price increases, they do not necessarily fuel prolonged inflation.
"Tariffs raise prices," Goolsbee said, "but a one-time cost increase doesn't necessarily translate into sustained inflation."
Trump has advocated for across-the-board tariff hikes, including specific increases on Chinese imports, positioning tariffs as a tool to protect American jobs and counter foreign economic practices.
However, economists warn that such measures could exacerbate inflation, a concern that Trump has dismissed.
Goolsbee acknowledged that while tariffs do drive up costs for producers, leading to higher consumer prices, the inflationary effects are typically short-term.
Looking ahead to the Fed's annual meeting in Jackson Hole, Wyoming, Goolsbee said that no decisions have been made regarding interest rates.
"Recession remains a possibility," Goolsbee said.
"Despite the higher-than-expected GDP growth, we must remain vigilant. That's the responsibility of the central banker.
Although he is not currently a voting member of the Federal Open Market Committee, Goolsbee said the committee has been clear about what economic conditions would be needed to cut rates.
"I do think that the — we set an interest rate more than a year ago at a high level because we were fighting inflation, and the economic conditions today are very different than they were when we set the rate at this level," he added.
