Chicago Federal Reserve President Austan Goolsbee cautioned Monday that sweeping tariff retaliation could stoke inflationary pressures and trigger a shift in consumer behavior, raising concerns about the potential fallout from escalating global trade tensions.
Speaking amid rising fears of a trade war sparked by renewed U.S. tariff threats, Goolsbee emphasized the complexity of the current economic backdrop. “We are in a nearly unparalleled scenario where the hard economic data remains strong, yet deep uncertainty persists,” he said, noting that Fed policymakers are “hearing anxiety” from across sectors.
Key Quotes:
“Nearly unparalleled scenario where solid US economic data appears positive, but many uncertainties linger.”
“Fed policymakers hear anxiety.”
“Anxiety, if tariffs are as large as announced, with counter-tariffs, could lead to supply disruptions, high inflation.”
“Significant tariff retaliation could boost inflation.”
“Global trade war eruption may lead to consumer behavior shift.”
“If this evolves into a worldwide era of trade, and refrain from imposing significant tariffs on one another, it won‘t have this adverse effect.”
“Federal job is to examine hard data.”
Goolsbee’s comments reflect growing concern within the Federal Reserve about the inflationary risks posed by aggressive tariff measures and potential retaliatory moves from global trading partners. He warned that if the current trajectory evolves into a full-blown global trade war, it could upend supply chains and shift consumer spending patterns, complicating the Fed’s monetary policy outlook.
Market Reaction
The U.S. Dollar Index (DXY) edged lower in response to Goolsbee’s remarks, dipping 0.06% to 103.44 at the time of reporting. The market reaction suggests investor caution amid mixed economic signals and heightened geopolitical uncertainty.
With tariffs and trade policy now back in sharp focus, the Fed may face additional challenges in balancing its inflation mandate with preserving economic momentum.
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