Aug 28, 2026 · 54 min
Goolsbee warns shocks could keep overheating the economy
Austan Goolsbee Is Worried the Economy Is Overheating
The episode examines how tariffs, supply constraints, AI investment, and uncertain interest-rate signals complicate the Fed’s next decisions.
- 1Persistent supply shocks could turn temporary inflation into a lasting problem for monetary policy.
- 2AI data-center investment may create resource constraints that force the Fed to respond to demand-driven overheating.
- 3Goolsbee favors explaining the Fed’s reaction function over pre-committing to future rate decisions.
Don't miss
Austin Goolsbee explains why he opposed front-loading rate cuts when policymakers had limited economic data.
The brief
From Jackson Hole, Austin Goolsbee argues that judging whether policy is restrictive depends on an uncertain neutral rate, making r-star difficult to use in practice.
Tariffs and repeated supply shocks could make inflation persistent, while AI data-center investment may strain resources and push demand beyond the economy’s capacity.
Goolsbee revisits post-COVID inflation, arguing that supply disruptions helped drive both the surge and the subsequent disinflation, rather than fiscal or monetary policy alone.
The conversation turns to bond yields, dot plots, press conferences, and forward guidance, with Goolsbee favoring a clear reaction function over promises about future rates.
Goolsbee explains why he resisted front-loading rate cuts and reflects on dissenting inside the Fed, while Jay Powell’s leadership and possible communications reforms emerge as key signals.
The episode’s central tension is whether the Fed can communicate its priorities clearly without relying on tools that imply more certainty than policymakers possess.
Featuring
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