Federal Reserve's Goolsbee: If large-scale tariffs can be avoided, policy interest rates can be lowered

Federal Reserve's Goolsbee: If large-scale tariffs can be avoided, policy interest rates can be lowered

Reuters, May 29 - Chicago Federal Reserve Bank President Goolsbee stated on Thursday that he believes if large-scale tariffs can be avoided through trade agreements or other means, the Federal Reserve is likely to lower interest rates, considering the fundamental strength of the economy and the direction of inflation.

Goolsbee compared the economic impact of tariffs to a layer of fat on healthy abs. "You have to remove everything on top first to see it," Goolsbee said at the 2025 Mackinac Policy Conference. "I feel the same way about the economy. You know, if we can remove all of this, we will see the six-pack underneath."

Goolsbee did not directly comment on a ruling made by the U.S. Trade Court on Wednesday. This ruling blocked many tariffs imposed by the Trump administration, including those imposed on "Liberation Day" on April 2.

Goolsbee noted that prior to the aforementioned date, the labor market was stable, and inflation was moving toward the Federal Reserve's 2% target, conditions that would have allowed the Federal Reserve to lower the policy interest rate range from the current 4.25%-4.5%, moving toward a long-term stable point. According to the latest forecasts from Fed policymakers, the long-term neutral interest rate is about 3%.

Goolsbee mentioned that currently, the uncertainty surrounding tariffs has led businesses to "put down their pens" and wait for clarity on tariff policies.

The Federal Reserve is also facing a similar situation, with policymakers particularly concerned that tariffs may disrupt the downward trend of inflation and push up unemployment rates