Trump, Harris’ Inflation Arguments Are Moot: Chicago Fed President

Chicago Federal Reserve President Austan Goolsbee warned Sunday against misrepresenting the inflationary impacts of corporate price hikes and tariffs, which have become focal points of the Trump and Harris campaigns’ economic agendas.

Goolsbee avoided speaking directly about the presidential race, given the Fed’s commitment to remaining independent and politically neutral. But his comments come during an election cycle in which voters have consistently ranked the economy and the high cost of living as their top priorities.

As a result, both Vice President Kamala Harris and former President Donald Trump have made cost-cutting the driving force behind their economic proposals.

Harris has proposed a federal ban on “corporate price speculation in the food and grocery sectors.” The Biden administration has repeatedly blamed stubbornly high prices on companies that have kept their prices artificially high despite falling production costs.

While Goolsbee declined to comment explicitly on Harris’s campaign proposals, he said the high prices could not be explained solely by corporate profit motives.

“The difference between what happens to prices and what happens to costs can vary greatly over the course of the business cycle,” Goolsbee said on CBS’s “Face the Nation.” “So I caution everyone against drawing exaggerated conclusions from any observation about markups.”

Goolsbee also clarified the inflationary impact of the tariff hike, a key pillar of Trump’s proposed economic plan.

“Tariffs increase prices,” he said. “A one-time increase in costs will increase prices, but it’s not a prolonged inflationary thing.”

Trump has repeatedly promised that he would raise tariffs on all imports in general, including applying a higher rate specifically to Chinese imports.

Economists have cited the proposed tough tariffs as a key reason why Trump’s proposed program could threaten to reignite inflation, but the Republican presidential nominee has adamantly rejected the idea.

“A tariff is a tax on a foreign country… It’s a tax on a country that’s robbing us and stealing our jobs, and it’s a tax that has no effect on our country,” Trump said at his Pennsylvania rally on Saturday.

Goolsbee said that tariffs do not necessarily lead to long-term inflation, but by raising production costs, they increase consumer prices in the short term.

“Whether or not you want to call this inflationary, it increases costs and increases prices,” he said.

Inflation has cooled slightly in recent months since it hit sky-high levels in the summer of 2022. On Wednesday, the annual inflation rate in the consumer price index report hit its lowest level since March 2021.

But as Trump and Harris work to sell their economic arguments to inflation-weary voters, investors’ eyes are on the Fed. Many are hoping the central bank will cut interest rates in September, especially as recession fears grow.

The Fed is preparing for its annual meeting in Jackson Hole, Wyoming, next week, where markets will be looking for signs of an interest rate cut.

Goolsbee, who is not currently a voting member of the Federal Open Market Committee, stressed that the Fed is still mulling its interest rate decision.

“Everything is always on the table, there is the possibility of a recession,” he said. “The latest GDP growth number was higher than expected, so that was one of the bright spots, but you always have to be concerned about every eventuality. That’s the job of a central banker.”