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Federal Reserve official Austan Goolsbee warned that rising oil prices could pose serious risks to the global economy. Goolsbee stated that the worst-case scenario could be a recession triggered by stagflation, driven by rising energy costs.
“Hopefully It Won’t Be Permanent”
According to Goolsbee, markets are concerned that inflation could rise again, and a surge in oil prices to $5 per gallon could put pressure on supply chains. The FDE official noted that this could slow economic activity, but expressed hope that the increase in energy prices would be temporary.
However, Goolsbee warned that if high inflation persists for an extended period, it could become permanently entrenched in the economy. Describing the current situation as “complex,” Goolsbee said the Fed lacks a clear roadmap to guide its policy-making.
Goolsbee stated that the labor market was generally stable but growth remained weak, adding that rising oil prices could create a stagflationary shock and lead to a resurgence of inflation.
On the other hand, Goolsbee stated that questioning the independence of the Fed would be a “bad idea,” arguing that the current legal framework does not contain any obligation to guarantee the satisfaction of either the stock market or political authorities.
*This is not investment advice.