Inflation impact from tariffs may be temporary, says Goolsbee

Austan Goolsbee, the President of the Federal Reserve Bank of Chicago, believes that the inflation caused by tariffs might only be temporary. He explained that if tariffs are limited and not met with retaliation, their impact on the economy could fade away. Currently, there has been an increase in tariffs under President Donald Trump, including a 20% tariff on imports from China and taxes on steel and aluminum. Retaliatory tariffs from countries like Canada and the European Union are also in effect or being planned. Goolsbee warned that if tariffs become larger and lead to more retaliations, the Federal Reserve may need to adjust its policies. He emphasized that significant tariffs could disrupt supply chains, making it harder to ignore their effects. Recently, Federal Reserve Chair Jerome Powell mentioned "transitory" inflation after a policy meeting. He indicated that while it is challenging to predict how tariffs will affect prices, he anticipates inflation will decrease over time. Goolsbee noted that the economy still appears strong. He expects interest rates to lower in the next year or so if inflation continues to decline.