Chicago Federal Reserve President Austan Goolsbee said Thursday that energy inflation tied to the war in Iran has lasted longer than initially expected.
Goolsbee made the remarks to CNBC’s Kaori Enjoji at the Bank of Japan-IMES Conference, warning of broader economic consequences for energy-importing nations.
He said futures markets had originally expected energy prices to come in “a lot lower” than where they currently stand.
Oil prices have eased somewhat on signs of progress in U.S.-Iran peace talks, but remain well above pre-war levels.
Brent crude futures gained over 1.81% to $96 per barrel, while West Texas Intermediate futures gained 1.71% to $90.21 per barrel.
Those figures compare with $72 for Brent and $67.02 for WTI recorded the day before the U.S. and Israel launched strikes on Iran.
Goolsbee issued a direct warning for Asian economies, saying their status as energy importers made the situation “more just a stagflationary shock of the old-fashioned variety.”
The Chicago Fed president, who voted against the Federal Reserve’s final rate cut in 2025, said 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,” he said.
Despite his caution, Goolsbee said 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.”
Goolsbee also raised concerns about artificial intelligence potentially overheating the broader economy before its productivity benefits fully materialize.
“My concern is that future increases in productivity that make us rich may fuel high equity prices that they are a 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,” he added.
He said policymakers should monitor whether stock market gains linked to AI are feeding into 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.?” Goolsbee said.
He noted the same dynamics could eventually reach Asian markets, since new technologies rarely stay concentrated in a single country.
“If there is productivity growth to be had from AI, it will be coming soon to Asian countries too,” he said.
