Fed's Goolsbee Warns of Inflation Risks from Supply Shocks and AI Overheating

Chicago Fed President Austan Goolsbee issued hawkish warnings that allowing inflation to stay above the 2% target for more than five and a half years is 'playing with fire.' Speaking at an Illinois Manufacturers' Association event, Goolsbee urged policymakers to reconsider looking through supply-side shocks and warned that overly optimistic AI expectations could overheat the economy. He noted the Fed's mandate does not require shielding equities or bond markets. Following the remarks, financial markets priced in a 64% probability of an October rate hike, while WTI crude dropped $2.29 on an SPR release.