A Federal Reserve president thinks fears of a 1970s-style stagflation are overblown

• Federal Reserve leader Austan Goolsbee smoothed stagflation fears at the Aspen Ideas Festival.
• Goolsbee cited low unemployment and falling inflation as reasons not to panic.
• Despite pressure, the Federal Reserve maintains high interest rates to bring down inflation.

A Federal Reserve leader thinks that fears of stagflation are overblown.

Speaking at the Aspen Ideas Festival in Colorado, the president of the Federal Reserve Bank of Chicago, Austan Goolsbee, pushed back on concerns that recent supply-side shocks, like tariffs and global military conflicts, could trigger a return to an era of double-digit inflation and sky-high joblessness.

Goolsbee said that with unemployment near 4% and inflation around 2.5% and falling, he sees no possibility that tariffs or another supply-side shock could cause actual 1970s-style stagflation in the near term, referring to a time when inflation topped 13% and unemployment exceeded 8%.

"There's definitely the possibility of both things getting worse at the same time," Goolsbee added, referring to inflation and unemployment. "And there you usually say, well, how long is each side's discrepancy going to last? Do you think it's temporary or do you think it's permanent? And how big is each side… that's the way I think about it."

Goolsbee offered no forecast, but his remarks come as the Federal Reserve continues to hold interest rates in an effort to bring inflation back to its 2% target.

While core inflation, which excludes more volatile prices like food and energy, is down from its 2022 peak, it has remained sticky in key sectors like housing and services.

Despite mounting pressure from markets and President Donald Trump to cut rates, Jerome Powell, chair of the Federal Reserve, has said the agency needs to see stronger evidence that inflation is firmly under control, especially after several months of higher-than-expected price indexes earlier this year.

In a post on Monday, Trump called the chair "Jerome 'Too Late' Powell" and said that people in the US "should be paying 1% Interest" in a social media post. The Trump administration is also looking into ways to replace Powell, though his term doesn't expire till next May. Powell's term as a member of the board of governors also doesn't expire until 2028.

The White House did not immediately respond to a request for comments.