Inflation is moving the wrong way

**SPEAKER_1** (0:00)
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**Kai Ryssdal** (1:31)
Tell you what, we've got just what you need on a Monday. Yep, a little macroeconomic analysis from American public media. This is Marketplace.
In Los Angeles, I'm Kai Ryssdal. It is Monday today, 22 June. Good as it always is to have you along, everybody.
There is a lot going on out there right now. Politics, of course, and always. Foreign affairs and national security, definitely. But as we say around these parts, do not sleep on the economy, so we won't. Austan Goolsbee is the president of the Federal Reserve Bank of Chicago. Awesome, welcome back to the program. Always good to have you on.

**Austan Goolsbee** (2:20)
Kai, thank you for having me back.

**Kai Ryssdal** (2:22)
Let's start where we left off last time, which was October-ish of last year.
Your general through line was that inflation was your big concern, the labor market maybe not so much. I guess I wonder if your thinking has changed at all.

**Austan Goolsbee** (2:36)
Hasn't changed that much. I ended up, as you know, dissenting at the last meeting of the year on those same grounds, that I wanted to get some more information to make me feel better about inflation before front-loading too many rate cuts. I don't regret that descent. I think we've continued to have a pretty stable labor market and we've continued to be dealing with, and it's not a surprise to anybody you look at the window of your car or go to the grocery store, we've been dealing with an inflation problem that's well above the target and has been going the wrong way.

**Kai Ryssdal** (3:19)
So let's talk about it going the wrong way. To sort of paraphrase what happened at Chairman Warsh's press conference, the number to the left of the decimal here is four. I guess I wonder with inflation going the wrong way and economic growth going the other way, GDP is at 1.6 percent in the first quarter.
Stagflation on your mind, you said it in an interview the other day.

**Austan Goolsbee** (3:45)
Stagflation, as you know, has been the stagflationary shocks, as I would call them, are the nightmare scenario, a nightmare scenario for any central bank because there's not an obvious playbook of what you do. Now, the only thing that I will caveat with is this hasn't actually been a stagflationary shock in the sense that the job market has been pretty stable.
So, what's been on my mind is, what is the evidence that this is going to be temporary and that we're going to get back on path to 2%, which is what we've promised? And there are some signs, like the fact that some of the inflation came from tariffs and that's supposed to be one and done, that we could get some resolution in the Middle East and maybe that inflation would go away. The fact that we've seen it in services, which historically is pretty persistent, is a little more disturbing.

**Kai Ryssdal** (4:47)
So, where are you in the look through school? Do you subscribe or do you not subscribe to this idea that the Fed can look through what's going on?

**Austan Goolsbee** (4:56)
Well, some of both, you know, I guess I'd say some of both. I understand the argument in principle that you want to look through temporary shocks.
And given that I wasn't there, so don't blame me, but given that the Fed dealt with that error in the very recent past where it thought, hey, these shocks are supposed to go away quickly and they did not, I do want us to at least, in terms of our credibility, let's acknowledge the possibility that these things are lasting longer than we wanted them.