Austan Goolsbee speaks in Jackson Hole on August 8, 2023.
David A. Grogan | David A. Grogan CNBC
Chicago Federal Reserve President Austen Goolsby warned on Sunday against misrepresenting the inflationary impact of rising prices for businesses and tariffs, which have become a focus of the economic platform of the Trump and Harris campaigns.
Goolsby did not speak directly about the presidential campaign; Fed's Commitment Remain independent and politically neutral. But his comments come during an election cycle where voters have consistently cited the economy and high cost of living as top priorities.
As a result, both Vice President Kamala Harris and former President Donald Trump have made cost reductions a driving force behind their economic proposals.
Harris proposed a federal ban on “price gouging by companies in the food and grocery industry.” The Biden administration has repeatedly blamed stubbornly high prices on companies that keep prices artificially high even as production costs fall.
While Goolsby did not comment explicitly on the Harris campaign's proposal, he said the high price cannot be explained solely by the corporate profit motive.
“The difference between price changes and cost changes can vary significantly over the business cycle,” Goolsby said on CBS's “Face the Nation.” “So I would just caution people, don't take anything from any Excessive conclusions were drawn from the observations about markups.”
Goolsby also clarified the impact of rising tariffs on inflation, one of the key pillars of Trump's economic plan.
“Tariffs raise prices,” he said. “The one-time increase in costs will increase prices but will not cause long-term inflation.”
Trump has repeatedly promised that he will raise tariffs on all imported products across the board, including imposing higher tariffs specifically on Chinese imports.
Economists point to tough tariff proposals as a major reason why Trump's proposed agenda could lead to a renewed rise in inflation, but the Republican presidential nominee flatly rejects that view.
“Tariffs are a tax on a foreign country… It's a tax on a country that is ripping us off, stealing our jobs, and it's a tax that doesn't affect our country,” Trump said at a rally in Pennsylvania on Saturday.
Goolsby said tariffs do not necessarily lead to long-term inflation, but they do increase consumer prices in the short term by raising producer costs.
“Whether you want to call it inflation or not, they're going to raise costs and raise prices,” he said.
Inflation has cooled slightly over the past few months since reaching extremely high levels in the summer of 2022.
But as Trump and Harris work to sell their economic case to inflation-weary voters, investors are turning their attention to the Federal Reserve. Many hope the central bank will cut interest rates in September, especially as recession fears grow.
The Federal Reserve is preparing for its annual meeting next week in Jackson Hole, Wyoming, where markets will be looking for signs of a rate cut.
Goolsby, who is not currently a voting member of the FOMC, stressed that the central bank is still considering its rate decision.
“Everything is on the table – there is a possibility of a recession,” he said. “The last GDP growth number was higher than expected, so that's one of the bright spots, but you always have to worry about every contingency. That's the job of a central banker.”