Fed's Goolsbee (2027 Voter) voiced concern about how long the Iran war will last, and more rate cuts in 2026 are unlikely without disinflation

Goolsbee’s comments suggest a cautious stance from the Fed regarding rate cuts, highlighting the potential impact of prolonged geopolitical tensions and supply shocks on inflation.

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Fed's Goolsbee (2027 Voter) voiced concern about how long the Iran war will last, and more rate cuts in 2026 are unlikely without disinflation

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  • Fed does not normally tighten into a supply shock.
  • Inflation expectations are anchored so far.
  • If gas gets to USD 5 and stays there for months, inflation expectations could get unanchored. 
Context

His emphasis on the need for disinflation before considering further cuts aligns with maintaining stable inflation expectations; if energy prices surge significantly, it could jeopardize this stability, implying that the Fed is closely monitoring both inflation dynamics and external pressures. This sentiment may affect market pricing for future Fed rate movements and can lead to increased volatility in related assets such as USD and energy commodities.

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