Fed official warns that taming inflation may require painful job losses

In a London speech, Austan Goolsbee, head of the Federal Reserve Bank of Chicago, warned that the U.S. central bank may have to accept higher unemployment to bring inflation back to its 2% goal. He cited a series of ongoing supply shocks, including rising oil prices caused by the Iran war and tariff pressures, as the drivers of persistent price growth. Traditionally, the Fed would wait for such shocks to fade, but Goolsbee said one outlet environment leaves little choice but to raise interest rates further.

The rate hikes are intended to curb consumer and business demand until it matches the constrained supply, a move he admitted will be "painful" for the labor market. His remarks differ from those of Fed Chair Kevin Warsh, who recently suggested that harming employment is unnecessary. Historically, similar rate increases have slowed growth and sometimes triggered recessions, though recent hikes have lowered inflation without a sharp rise in unemployment.