The president of the Chicago Federal Reserve has raised doubts about the validity of inflation arguments made by Trump and Harris.

On August 8, 2023, Austan Goolsbee, President of the Chicago Federal Reserve, spoke at Jackson Hole, cautioning against oversimplifying the inflationary effects of corporate price increases and tariffs. These issues are central to the economic strategies of both the Trump and Harris campaigns. Goolsbee avoided direct commentary on the presidential race to maintain the Fed’s political neutrality. However, his remarks come at a time when economic concerns and the high cost of living are top priorities for voters.

Vice President Kamala Harris has proposed a federal ban on “corporate price-gouging” in the food and grocery sectors, with the Biden administration attributing persistently high prices to companies maintaining elevated prices despite reduced production costs. Goolsbee refrained from directly addressing Harris’s proposals but noted that high prices cannot be solely attributed to corporate profit motives. He emphasized that the relationship between prices and costs can fluctuate significantly over the business cycle, cautioning against drawing broad conclusions from isolated observations.

Regarding tariffs, a key element of Trump’s economic plan, Goolsbee clarified their inflationary impact. He explained that while tariffs increase costs and consumer prices in the short term, they do not necessarily lead to prolonged inflation. Trump has pledged to raise tariffs on all imports, particularly from China, arguing that tariffs are a tax on foreign countries that exploit the U.S. and do not affect the domestic economy. Economists, however, warn that such a tariff policy could reignite inflation.

Inflation has been gradually decreasing since its peak in the summer of 2022, with the latest consumer price index report showing the lowest annual inflation rate since March 2021. As Trump and Harris present their economic plans to voters concerned about inflation, investors are closely watching the Federal Reserve, hoping for an interest rate cut in September amid rising recession fears. The Fed’s upcoming annual meeting in Jackson Hole, Wyoming, will be closely monitored for any indications of a rate cut.

Goolsbee, who is not currently a voting member of the Federal Open Market Committee, emphasized that the Fed is still considering its interest rate decision. He acknowledged the possibility of a recession but noted that the recent GDP growth was higher than expected, highlighting the need for the central bank to remain vigilant and prepared for various contingencies.