Federal Reserve’s Goolsbee warns supply shocks can cause lasting inflation that must not be ignored

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, delivered a stark message to central bankers and financial officials gathered in London: the playbook for handling supply shocks no longer works. Speaking at the Official Monetary and Financial Institutions Forum (OMFIF) on September 21, Goolsbee argued that disruptions from tariffs, lingering post-COVID supply chain damage, and oil prices hovering around $100 per barrel are producing inflation that sticks around far longer than traditional models predict. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures Price Index, sat at 3.7% year-over-year as of July 2026, nearly double the central bank’s 2% target. The end of ‘looking through’ supply shocks For decades, the standard central banking response to a supply shock was to wait it out. A hurricane disrupts refining capacity, oil spikes, gas prices jump, and then everything settles back down. The Fed’s job in those moments was to hold steady and let the shock dissipate on its own. Goolsbee is saying that framework is broken. When supply shocks come in waves, from tariffs layered on top of pandemic-era bottlenecks layered on top of energy price ...