Chicago Fed President Austan Goolsbee Talks Jobs Report, Potential for Rates to Go Down

Summary

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Summary: Chicago Fed President Austan Goolsbee Talks Jobs Report, Potential for Rates to Go Down

Podcast: Bloomberg Talks
Episode Date: May 8, 2026
Host: Michael McKee (Bloomberg Economics Correspondent)
Guest: Austan Goolsbee (President, Federal Reserve Bank of Chicago)
Context: Conversation recorded at the Hoover Institution Monetary Policy Conference, Stanford University.

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Episode Overview

This episode features a timely and candid interview with Chicago Fed President Austan Goolsbee, following the latest U.S. jobs report. Goolsbee shares his views on the labor market, inflation risks, Federal Reserve communication policy, and potential shifts as a new Fed Chair is expected to take over. The conversation offers valuable insights into policymaker thinking in the face of persistent inflation and expectations for interest rates.

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Key Discussion Points and Insights

Labor Market Stability and The Jobs Report

• Jobs Data Reaction
  • Goolsbee’s View: The latest jobs report indicates a stable labor market, which relieves immediate concerns about employment.
  • Quote:

    "For right now, for the month, I mean it felt like a pretty stable month. The unemployment rate itself holding kind of stable, decently positive on the payroll employment growth given the context of where we've been. So you never want to make too much of one month. But, but it wasn't a worry point for sure."
    — Austan Goolsbee, [00:59]

• Trend on Employment:
  • Multiple months of stability suggest employment is not currently a risk.

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Inflation Concerns Dominate Policy Thinking

• Primary Focus on Inflation
  • Goolsbee’s Outlook: Inflation is the “topic of the moment,” especially as previously observed progress toward the 2% target has stalled and, more recently, reversed.
  • Quote:

    "I've been feeling that, as you know, Mike, I'm optimistic fundamentally. If we get some progress on inflation...rates can go down. We just haven't been having that now for some time and that makes me more concerned and I'm less optimistic."
    — Austan Goolsbee, [01:34]

  • Inflation's persistence above the Fed’s 2% target (now five years running) is cited as a serious concern, with new shocks from tariffs and oil compounding the problem.

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Debate on Forward Guidance and Fed Communication

• Forward Guidance Skepticism
  • Goolsbee expresses skepticism about the appropriateness of forward guidance, especially outside extraordinary conditions like the zero lower bound.
  • Quote:

    "Before I ever got to the Fed, I was always a little publicly skeptical about the value...of using forward guidance to begin with...I think that can be unwise to use at moments where we're not at the zero lower bound..."
    — Austan Goolsbee, [03:00]

• Committee Statement Wording:
  • He downplays the significance of statement tweaks unless specific conditions warrant greater clarity.
  • He is sympathetic to Chair nominee Kevin Warsh’s “reservations” about forward guidance.

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Policy Bias and Dissent

• Leaving the Bias Statement Unchanged
  • Goolsbee refrains from speculating on colleagues’ rationale, but he frames current policy as focusing on inflation given persistent overshooting.
  • Quote:

    "I don't see how you can look at the current situation and at least to me view that the only thing that's on the table conceivably are rate cuts. Inflation's been above the target for five years. Stalled out...the new data that are coming in are worse than the months before."
    — Austan Goolsbee, [04:42]

  • Worries that inflation is spreading to “core services” not directly affected by tariffs or oil.

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Inflation Expectations and Consumer Sentiment

• Risks If High Inflation Becomes “Normal”
  • Goolsbee agrees that entrenched inflation expectations are dangerous and make it harder for the Fed to regain control.
  • Quote:

    "If people begin assuming that inflation is going to continue at higher than desired rates, it becomes a lot harder to get rid of the inflation and it puts the central bank in a lot tougher [position]."
    — Austan Goolsbee, [06:16]

• Role of Oil Prices:
  • Gasoline price spikes can distort consumer inflation expectations more than core data might suggest.
  • Quote:

    "When the price of oil, specifically price of gasoline, very public price, when it goes up, there is a lot of consumer level expectation that responds...in kind of an outsized way."
    — Austan Goolsbee, [06:44]

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Fed Response to Supply Shocks and Stagflation

• Monetary Dilemma:
  • Goolsbee explains that with stagflation (inflation + stagnating employment), the Fed’s tools are limited and each option (“raise,” “cut,” or “hold” rates) has drawbacks.
  • Quote:

    "If you face a negative supply shock that destroys employment and drives up prices at the same time, raising...rates doesn't solve your problem...So the monetary framework that we passed unanimously...we said...we'll look at which side is deviating more. And how long do we think the deviation is going to last?"
    — Austan Goolsbee, [07:42]

  • The current situation, where inflation worsens while jobs remain steady, means inflation should be the chief policy focus.

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Leadership Transition and Structural Changes

• New Chair’s Prospective Reforms:
  • Dot Plot/ACP (Summary of Economic Projections):
    • Goolsbee is open to changing or even eliminating these communication tools, referencing prior dissatisfaction.
    • Quote:

      "I've written in past years about some dissatisfactions that I've had about the...release of the dot plots and the ways in which it doesn't help to identify what the reaction function is of the committee."
      — Austan Goolsbee, [09:38]

  • Balance Sheet Reduction:
    • He notes that the balance sheet size depends on the monetary policy regime—today’s “ample reserves” approach needs a larger sheet. Goolsbee does not take a strong position but favors reviewing new proposals under new leadership.
    • Quote:

      "Now we've shifted to this...ample reserves regime. We pay interest on reserves. That's a different way of doing monetary policy and it...corresponds with a bigger balance sheet than the old way."
      — Austan Goolsbee, [10:34]

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Notable Quotes and Memorable Moments

• On the limits of monetary policy in stagflation:

  "Raising the rates doesn't solve your problem. Cutting the rates doesn't solve your problem, and leaving your rates where they are doesn't solve your problem."
  — Austan Goolsbee, [07:42]

• On consumer expectations:

  "If people begin assuming that inflation is going to continue at higher than desired rates, it becomes a lot harder to get rid of the inflation and it puts the central bank in a lot tougher [position]."
  — Austan Goolsbee, [06:16]

• On Fed credibility:

  "For all credibility of the Fed, we have to be paying attention to the inflation rate when it's deteriorating and going the wrong way."
  — Austan Goolsbee, [05:28]

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Timestamps for Important Segments

• Labor Market Stability and Jobs Report: [00:41] – [01:25]
• Inflation as Main Concern: [01:34] – [02:47]
• Debate over Forward Guidance: [03:00] – [04:30]
• Policy Bias and Fed Statement: [04:30] – [05:28]
• Inflation Expectations and Consumer Psychology: [06:01] – [07:24]
• Stagflation and Policy Limits: [07:42] – [09:14]
• Structural Change (Dot Plot, Balance Sheet): [09:14] – [10:34]

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Conclusion

Austan Goolsbee presents a nuanced take on the Federal Reserve's current challenges. While the labor market remains steady, inflation's persistent upward pressure has replaced jobs as the primary worry for policymakers. Goolsbee expresses openness to rethinking Fed communication strategies and structure as new leadership arrives, but is firmly focused on addressing inflation expectations before they become entrenched. His remarks underscore the difficulty central banks face when shocks hit both inflation and employment, and highlight the Fed’s delicate balancing act heading into a leadership transition.

Transcript

[Austan Goolsbee]

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[Narrator/Announcer]

Bloomberg

[Austan Goolsbee]

Audio Studios, Podcasts, Radio news and now to the West Coast, Bloomberg and TV and radio. International economics and policy correspondent Michael McKee is out there catching on the sidelines of the Hoover Institution Monetary Policy Conference at Stanford University. That's where we find him sitting down with the president of Chicago Fed, Austan Goolsbee.

[Michael McKee]

Thanks guys and thank you very much, Austan for joining us. Taking time out from the conference here. Obviously we all got up early to watch the jobs report here come out at 5:30 Pacific Time. Did you basically walk away from that thinking, okay, employment's off our worry list

[Austan Goolsbee]

for right now for the month. I mean it felt like a pretty stable month. The unemployment rate itself holding kind of stable, decently positive on the, on the payroll employment growth given the context of where we've been. So you never want to make too much of one month. But, but it wasn't a worry point for sure.

[Michael McKee]

Well, a couple of months in a row now we've had decent job creation and an unemployment rate that basically stable. So is inflation the main danger right now?

[Austan Goolsbee]

It's, I've been feeling that, as you know, Mike, I'm optimistic fundamentally. If we get some progress on inflation and we show we're headed back to the, to a path of on our way to 2% inflation, I'm optimistic rates can go down. We just haven't been having that now for some time and that makes me more concerned and I'm less, I'm less optimistic. We've been above the 2% Fed inflation target for five years and we were at least making progress for much of that time. Last year we stopped making progress and the hope was the pause in progress was going to be temporary as the tariffs increased one time, cost one time and then went away. That we would add now an oil shock on top of things before the other went away. So we're not really sure if or when that part's going to go away. I think for me makes inflation the, that's the topic of the moment. We got to get some clarity.

[Michael McKee]

Well then where do you stand on the bias debate? You didn't join in, you weren't a voter so you couldn't vote to dissent. But do you support, are you sympathetic to that idea?

[Austan Goolsbee]

I look, before I ever got to the Fed, I was always a little Publicly skeptical about the value appropriateness of using forward guidance to begin with, saying things that the committee doesn't think it's going to do X thing for some number of months or committing itself to two actions. Well, in the future, I think that can, that can be unwise to use at moments where we're not at the zero lower bound, when you, that kind of behavior really started. When we're at the zero lower bound, when you can't change the rates. Now we're not in that, in that circumstance. I usually don't get too worked up about the exact wording of the statement in of this kind of form because we don't know what the conditions are that the committee's going to be facing even at the next meeting, much less multiple meetings in the future. So let's just take a step back, take a step back and take a deep breath. To the extent that incoming chair Warsh says he wants us to think about communications in the statement, he's expressed some, not regrets, but some reservations, let's say, about the use of forward guidance. I'm pretty sympathetic with his view.

[Michael McKee]

Well, as a decision by most people to leave the bias statement in as it was basically sort of not tying the hands of the incoming chairman, I

[Austan Goolsbee]

don't know, you know the rules. I'm not allowed. I could speak only for what I think, not for what anybody else thinks or what's behind their votes. I don't see how you can look at the current situation and at least to me view that the only thing that's on the table conceivably are rate cuts. Inflation's been above the target for five years. Stalled out, progress stalled out last year. In the last three or four months, you've seen it deteriorating. The inflation rate is rising. The new data that are coming in are worse than the, than the months before. And you're seeing it in categories where it's not supposed to be, if it was just tariffs or oil prices, like core services, inflation. So I'm, I'm still hopeful that that's going to prove temporary. But we, if we start to see a deterioration of inflation expectations and the unemployment rate and the job market look stable. I don't, I think for all credibility of the Fed, we have to be paying attention to the inflation rate when it's deteriorating and going the wrong way.

[Michael McKee]

Well, let me ask you about what you think of expectations right now, because in his last press conference, Jay Powell noted that we'd had this series of supply shocks and that people were maybe getting used to the idea that inflation is normally this high.

[Austan Goolsbee]

Yeah, that's bad. I mean, if we start to see that in the data, as you know, we've got a long history in the United States and in other countries that if people begin assuming that inflation is going to continue at higher than desired rates, it becomes a lot harder to get rid of the inflation and it puts the central bank in a lot tougher.

[Michael McKee]

Do you think that's what people are thinking these days?

[Austan Goolsbee]

I hope not. But in history, when the price of oil, specifically price of gasoline, very public price, when it goes up, there is a lot of consumer level expectation that responds to the price of gasoline in kind of an outsized way. So before it showed up in the data, as soon as the war began and the price of oil surged, I said I would not be surprised if we saw a significant deterioration of consumer confidence, which we then did see. And we better keep an eye on the, on the inflation expectations because a

[Michael McKee]

lot of times it has lowest Michigan numbers ever today. But if you raise rates, it's not going to open the Strait of Hormuz, it's not going to tariffs away. So is that a viable strategy at this point or are you risking demand destruction?

[Austan Goolsbee]

Yeah, you are risking demand destruction. And you, you're just restating, slash rediscovering what makes stagflationary shocks among the worst things that a central bank has to deal with. Because if you face a negative supply shock that destroys employment and drives up prices at the same time, raising the rates doesn't solve your problem. Cutting the rates doesn't solve your problem, and leaving your rates where they are doesn't solve your problem. So the monetary framework that we passed unanimously in it, we thought about, well, what will we do if we get shocks that are hitting both sides of the mandate at the same time? And we said quite reasonably, we'll look at which side is deviating more. And how long do we think the deviation is going to last? I still think that's the reasonable way to think about it. But I would emphasize, as I say, the job market has been stable for a year, year and a half, the part that is deteriorating. And what has moved me from optimistic about rate cuts to less optimistic is that inflation alone is getting worse. It's not, it's not even stalled out in progress, it's getting worse, whereas the job market has been stable. So I kind of think by the criteria we, we outlined in, in that framework review, we got to it. It behooves us to take a serious look at what's happening on the inflation side?

[Michael McKee]

Well, we assume a week from today there will be a new chairman of the Fed and away from policy in terms of policy making, there are changes he wants to make. Let me run through a few of them and see what you're thinking. One of the things he's concerned about is the dot plot and the ACP and the fact that everybody focuses on the median. Would you be in favor of elimina changing either one of those?

[Austan Goolsbee]

I could be. I mean I'm going to be interested to see what presuming he's confirmed as chairman, see what he proposes. I've written in past years about some dissatisfactions that I've had about the, the release of the dot plots and the ways in which it doesn't help to identify what the reaction function is of the committee. So I think that Kevin Warsh is going to come in with a lot of new ideas on monetary policy, on balance sheet, on communication and those. I think it's good, let's have some new ideas and think those through.

[Michael McKee]

Well, the balance sheet of course is the big question. He wants to bring it down. There's a couple different ways you can do it. Do you think the balance sheet needs to be smaller? And if so, wow, how would you go about it?

[Austan Goolsbee]

I don't know about needs to be smaller. Can't can be smaller. Depends in large measure how you conduct monetary policy as you know. But in the older days up to 2008, we conducted monetary policy mostly through open market operations. Now we've shifted to this as we call it the ample reserves regime. We pay interest on reserves. That's a different way of doing monetary policy and it's corresponds with a bigger balance sheet than the old way. You could do it any number of ways and like I say, it's not, it's not my position to weigh in and say I want us to do it A, B or C direction. I'm interested in seeing what, what the new chair has in mind and evaluating that.

[Michael McKee]

It's going to be a fun new voyage. He'll take over maybe next Friday. We'll have you back Monday to talk about how everything has changed. That's right at the Fed, but hopefully we will have you back soon. Austan Goolsbee, he is the President of the Chicago Federal Reserve.

[Narrator/Announcer]

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