Asks Goolsbee how a policymaker views the incoming news on oil markets, inflation outlook, and effect on policy.
Steve
Austan Goolsbee
Describes this as an intense moment with a lot hanging in the balance. Notes 2025 experienced another inflationary shock, progress on inflation stalled and started inching back up. A new inflation shock is piling on before the previous one has left.
States that before the President's social media post, he was about to discuss how the outlook for the Fed funds rate in December had turned decisively toward a hike, with Fed watchers capitulating to the view that weak job market wouldn't stop the Fed from hiking due to intense inflation.
Steve
Austan Goolsbee
Dissented at last meeting because data didn't show inflation going away. Remained optimistic rates could go down by end of 2026 but wanted proof inflation was headed to 2%. Current situation throws a wrench into plans.
Asks how much weakness in the job market the Fed is willing to look through in the fight against inflation.
Steve
Austan Goolsbee
Points to monetary policy framework for when both sides of mandate go wrong: look at which deviation is bigger and how long each will take to return to acceptable levels.
Notes whipsaw reaction in Fed futures suddenly thinking odds favored December rate hike rather than cut. Asks if Goolsbee's own mind follows this whipsaw pattern.
Steve/Becky
Austan Goolsbee
No, central bank's job is to be the steady hand. The most important thing is to figure out the through line of what is happening.
Notes some smart people say inflation looks anchored (looking at spreads). Tariffs and Strait events are one-off. Asks if inflation is anchored and what inflation hawks see that makes them think it's ready to be back to 4%.
Host
Austan Goolsbee
Doesn't totally know others' views. Personally optimistic longer term, more pessimistic shorter term. Worried this could repeat transitory mistake where everyone assumed supply chain would fix itself quickly.
Notes 30% probability of hike by December (been as high as 60%). Asks if a hike is in the arsenal to address surge in oil prices and resulting inflation.
Steve
Austan Goolsbee
Everything is always on the table. Could be back to multiple rate cuts if inflation behaves, or could need to raise rates if inflation gets out of control.
Notes historical rule from 80s was to address inflation, but since then it's been economic state dependent. Hawks say Fed has abided inflation above target for long time, maybe reached end of rope, time to think about addressing oil shock.
Steve
Austan Goolsbee
Agrees. Cautions about intuition from 70s/80s because US wasn't nearly as big energy producer then.
Asks what Goolsbee has asked his researchers to look at relative to current situation.
Steve
Austan Goolsbee
Trying to think through impact of extended higher oil prices: how long before showing up in greater investment on employment/output side.