Chicago Fed President Warns Rate Cut Pushed Off by Ongoing War

Goolsbee says negative supply shocks like oil prices can raise inflation expectations, complicating Fed policy.

Apr. 14, 2026 at 3:52pm

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A minimalist, geometric illustration in primary colors, with a central triangle shape in shades of red and orange representing the intersection of high inflation, high unemployment, and stagnant growth - the key components of stagflation.As the Fed grapples with the economic fallout from the ongoing war, the threat of stagflation looms large.Chicago Today

Chicago Federal Reserve Bank president Austan Goolsbee warned that the longer the ongoing war continues, the more a potential interest rate cut by the Fed gets pushed off. Goolsbee said negative supply shocks like rising oil prices can problematically raise people's expectations of inflation, making it more difficult for the Fed to achieve its 2% inflation target.

Why it matters

The Fed's policy decisions on interest rates have significant impacts on consumer borrowing costs, investment, and the overall health of the economy. Goolsbee's comments suggest the Fed may be forced to hold off on any rate cuts this year due to persistent inflation pressures stemming from the ongoing war and supply chain disruptions.

The details

Goolsbee said that a few months ago, he was more optimistic the Fed could get inflation back to 2% and potentially implement multiple rate cuts in 2026. However, the prolonged war has changed that outlook, as the negative supply shock from higher oil prices can raise inflation expectations. The Fed is now closely watching for signs of stagflation - high inflation combined with stagnant growth and high unemployment - and will have to carefully evaluate whether to cut or raise rates depending on which economic conditions worsen.

  • The Federal Reserve chose to maintain interest rates at a target range of 3.50% to 3.75% at its most recent meeting in mid-March 2026.
  • Regular unleaded gas prices hit a national average of $4.16 per gallon on April 8, 2026, the highest since the summer of 2022.
  • The University of Michigan's Consumer Sentiment Index tanked to a record low of 47.6 in early April 2026, down from 53.3 in March, with consumers citing the Iran conflict and soaring gas prices as the main reasons for their pessimism.

The players

Austan Goolsbee

The president of the Chicago Federal Reserve Bank.

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What they’re saying

“[Three months ago] I was on the more optimistic side that we could have the tariff impact on inflation. Be one and done. We'll get back on the path to 2%. We could have multiple rate cuts in 2026 ... Now with this [war], the longer this goes, the more it pushes that off.”

— Austan Goolsbee, President, Chicago Federal Reserve Bank

“Figure out which side is getting worse, more, and how long do we think each side being out of alignment is going to last? That's what we'll have to do if this keeps getting worse.”

— Austan Goolsbee, President, Chicago Federal Reserve Bank

What’s next

The Fed will continue to closely monitor economic conditions, including inflation, growth, and employment, to determine if and when it may need to adjust interest rates in response to the ongoing war and supply chain disruptions.

The takeaway

Goolsbee's comments highlight the challenging position the Federal Reserve finds itself in, as persistent inflation pressures stemming from the war and supply shocks threaten to delay any potential interest rate cuts the central bank had been considering. The Fed will need to carefully balance its dual mandate of price stability and maximum employment as it navigates this complex economic environment.