Federal Reserve Bank of Chicago President Austan Goolsbee stated that the Supreme Court’s recent decision to overturn many of former President Donald Trump’s global tariffs could introduce additional uncertainty for businesses, while also potentially helping to alleviate inflationary pressures. Speaking to reporters on February 23, 2023, in Washington, Goolsbee emphasized that increased unpredictability in policy could lead to hesitancy in hiring and firing decisions among companies.
“The more unpredictability you have, the more question marks that businesses have about policy,” Goolsbee remarked. He noted that the current dynamic of low hiring and low firing appears to be exacerbated by this newly introduced uncertainty. Despite these challenges, he suggested that the ruling might provide some relief on the inflation front.
In light of the Supreme Court’s ruling, the Biden administration is exploring new legal pathways to potentially reimpose these tariffs, which were initially based on a 1977 emergency law that the court found inadequate.
Inflation Targets and Interest Rate Cuts
In his prepared remarks for a speech on February 24 at the National Association for Business Economics conference, Goolsbee expressed a cautious optimism regarding future interest rate cuts. “I remain optimistic that there can be more rate cuts this year. But that hinges on seeing actual progress on inflation that shows we are on a path back to 2%,” he stated. The Federal Reserve aims to keep inflation at a target rate of 2%, and Goolsbee indicated that evidence of cooling inflation is essential before further cuts can be considered.
Recent economic data suggest that inflation remains a pressing concern. A report released on February 20 showed that underlying prices increased by a greater-than-expected 3% over the year ending December 2022. Goolsbee clarified that the Fed’s assessment of inflation progress will not depend solely on the duration of price stabilization but on whether multiple economic components are moving towards the target.
The Federal Reserve has already implemented three rate cuts in the latter part of 2025, following a full percentage point reduction in 2024. As per expectations, rates were left unchanged during the January meeting, and analysts predict a similar outcome for the upcoming March meeting. Economists largely believe that another quarter-point cut will not occur until at least June, anticipating only two cuts throughout the remainder of the year.
Labor Market Stability and Leadership Perspectives
Goolsbee described the current labor market and economic growth as “pretty steady,” an assessment he shared during an interview on Bloomberg Television. When questioned about the future of Jerome Powell as chair of the Federal Reserve once his term concludes in May, Goolsbee expressed his high regard for Powell, stating, “I like him being around.” He also acknowledged Kevin Warsh, whom Trump has indicated he intends to nominate as the next chair.
Overall, the recent ruling and its implications for tariffs and inflation continue to create a complex landscape for businesses and policymakers alike. The Federal Reserve’s cautious approach to interest rates will depend significantly on ongoing economic indicators and their alignment with the central bank’s inflation targets.
