SCOTT DETROW, HOST:
For more on the inflation data and what it tells us about the economy, we are joined by Austan Goolsbee. He's the president of the Federal Reserve Bank of Chicago and the former chairman of the Council of Economic Advisers under President Obama. Welcome to ALL THINGS CONSIDERED.
AUSTAN GOOLSBEE: Thank you for having me.
DETROW: We know inflation is ticking up. One of the biggest stories of the year - consumer prices up 3.7% from last September. What is your initial thought when you heard that number?
GOOLSBEE: Yeah, this report was a little disheartening. I wasn't surprised to hear it because, as I've been going around the Chicago Fed District in the Midwest, what everybody's talking about - businesses, individuals, nonprofits - are about cost, about prices, about affordability. The thing that was unfortunate in this report, it's not just that the overall inflation was higher than expected and well higher than the Fed's 2% inflation target. As you started breaking out the components, the inflation of the sub parts, they didn't look that great either. So some things can lead to inflation that is inherently temporary, and those would be things - supposed to be like tariffs or oil shocks.
DETROW: Yeah.
GOOLSBEE: The services inflation in this report was a little distressingly high.
DETROW: Tell me more about that. Tell me what it is, and tell me why you think it's happening if it's not related to those big factors we've spent so much time focused on this year.
GOOLSBEE: We don't a hundred - we're still trying - everybody's trying to get the what is the through line. And we were hoping that - we had a couple of months of encouraging inflation readings, and we were hoping that the recent uptick might prove to be a blip. And so far, it's not. The danger is that the inflation is less coming from things that might naturally go away, like tariff impacts on prices, and is shifting more to just old fashioned overheating of demand. And if it were, everybody's pointing the finger at the AI buildout, the high investment. You hear a lot out on the trail. You hear a lot of comments that construction costs are rising radically, electronic components, electricians, even land - that anything that data centers and their booming investment are involved in, the software and others you're seeing prices rising pretty rapidly.
DETROW: You're an economist. You know politics, too. You are well aware how much President Trump is pressuring the Fed right now, politically, on social media, legal challenges that have been, you know, pushed back on by the Supreme Court. Do you think his various pressure campaigns will have any effect on what the Fed does next in terms of interest rates, given how clear he is that he doesn't want to see them go up?
GOOLSBEE: Well, you know the rules. Any member of the FOMC is only allowed to speak for themselves. They can't speak for the Fed or what the Fed thinks. There's a reason why economists are close to unanimous that central bank independence from political interference in setting the interest rate is extremely important because anywhere that they give up that independence from political interference, that's a recipe for seeing inflation come roaring back.
DETROW: I want to - last question - challenge you. This might be tough for a renowned economist like yourself. But if you could tell the story of this economy as you understand it right now in 30 seconds or less, what would it be?
GOOLSBEE: The biggest problem facing the economy is no secret to any - if you ask - anybody. It's about prices, affordability and inflation. And now we're grappling with this concept, with this idea, is this inflation going to go away on its own? Because the tariff shocks, the oil shocks, those kind of things are going to fade out - or are we reentering a very persistent inflation environment which is going to require more aggressive action to get us back to where we need to be?
DETROW: That's Austan Goolsbee, president of the Federal Bank of Chicago. Got to say, it was a minute and one second, but still a good answer. Thank you so much.
GOOLSBEE: (Laughter) Nice talking to you. Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
