Chicago Federal Reserve President Austan Goolsbee has warned that energy inflation linked to the war in Iran has lasted longer than initially expected.
Speaking to CNBC’s Kaori Enjoji at the Bank of Japan-IMES Conference, Goolsbee said futures markets had originally anticipated energy prices would be “a lot lower” than current levels.
Oil prices have eased recently on signs of progress in U.S.-Iran peace talks, but they remain well above the levels recorded before the war began.
Brent Crude futures gained over 1.81% to $96 per barrel, while West Texas Intermediate futures rose 1.71% to $90.21 per barrel.
Those figures compare with a Brent price of $72 and a WTI price of $67.02 recorded the day before the U.S. and Israel launched strikes on Iran.
Goolsbee warned that Asian economies, as energy importers, faced a particular challenge, describing the situation as “more just a stagflationary shock of the old-fashioned variety.”
The Chicago Fed President voted against the Federal Reserve’s final rate cut in 2025, saying he dissented because he wanted evidence that inflation would not prove persistent.
“I don’t regret dissenting at that meeting, because the inflation has not proved as temporary as was advertised at the beginning,” Goolsbee said.
Despite his concerns, Goolsbee indicated that if inflation moves back toward the Fed’s 2% target, interest rates would “ultimately settle at some place well below where they are today.”
On the subject of artificial intelligence, Goolsbee said he was concerned that financial markets could run ahead of the actual economic benefits delivered by AI adoption.
“My concern is that future increases in productivity that make us rich may fuel high equity prices that they are an increase in your wealth today, to know that you’re going to be rich sometime in the future,” he said.
“That can encourage people to spend out of this wealth in the stock market or others, and before the AI has actually increased the productivity, you can overheat the economy in the near term,” Goolsbee added.
He called on policymakers to monitor whether stock market gains linked to AI were creating broader inflation pressures across the economy.
“I want people to just pay attention to, are you seeing big increases in consumer spending fueled by stock market wealth increases? Are you seeing data center investment driving up the cost of electricity of construction workers and having this short-run impact upon inflation in the U.S.?” he said.
Goolsbee also noted that the same dynamic could eventually affect Asian economies, adding: “If there is productivity growth to be had from AI, it will be coming soon to Asian countries too.”