Fed's Goolsbee on Inflation Risk, Tariffs and Powell
Summary
- Goolsbee signals a pivot in Fed attention: The primary risk has shifted from the labor market (which he views as "steady") back to inflation, specifically the persistence of levels around 3%.
- He remains optimistic about "multiple rate cuts in 2026" but conditions this on inflation data, noting that the 2% target timeline keeps getting pushed back (moving goalposts).
- A key "weird duck" economic signal is identified: Low hiring paired with low firing. This indicates corporate paralysis due to policy uncertainty rather than a recessionary collapse.
- He validates the "AI Productivity" thesis (Kevin Warsh's view) but warns of short-term inflationary overheating in physical infrastructure (Data Centers, HVAC, Chips) before the deflationary productivity benefits arrive.
Trade Ideas
Austan Goolsbee
President, Federal Reserve Bank of Chicago
Goolsbee highlights that the Chicago Fed District (a hub for auto production) is "very amped up" about USMCA renegotiations and tariffs on "parts, components, supplies." The auto industry relies on a global/North American supply chain. Goolsbee explicitly states that CEOs are pausing hiring because "we don't know what the rules of the road are going to be." Uncertainty regarding tariffs freezes capital expenditure and complicates pricing models for legacy automakers. Avoid the sector until trade policy (USMCA/Tariffs) is clarified. A sudden, favorable resolution to trade talks could spark a relief rally.
Austan Goolsbee
President, Federal Reserve Bank of Chicago
Goolsbee states, "I'm pretty optimistic that we can get rates down further, multiple cuts in 2026," but simultaneously admits, "I'm a little more concerned about inflation right now." The bond market is pricing in cuts based on a cooling economy, but Goolsbee is warning that inflation is sticking at 3% and the "goalpost" for hitting 2% keeps moving to 2026. If inflation ticks up due to tariffs (even if transitory), the Fed cannot cut as aggressively as the market hopes. Neutral/Watch. The "optimism" for cuts supports bonds, but the "concern" for inflation caps the upside. Inflation re-accelerating forces the Fed to hold rates higher for longer, crushing long-duration bond holders.
Austan Goolsbee
President, Federal Reserve Bank of Chicago
Goolsbee notes that while AI productivity is a long-term positive, in the short run, "data center investment demand [is] using up all of the HVAC... electrical equipment... computer chips." The Fed President is confirming a physical supply shock. The build-out phase of AI is inflationary for the hardware supply chain. While the Fed worries about the macro inflation this causes, it is a direct revenue boom for the companies supplying the physical constraints (chips, cooling, power). Long the "Pick and Shovel" providers for the AI build-out. Fed tightening specifically to combat this sector-led inflation.
Up Next
This Bloomberg Markets video, published February 24, 2026, features Austan Goolsbee discussing F, GM, CARZ, TLT, EQIX, NVDA, BOTZ. 3 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Austan Goolsbee · Tickers: F, GM, CARZ, TLT, EQIX, NVDA, BOTZ