Chicago Federal Reserve President Austan Goolsbee said he was skeptical of Vice President Kamala Harris’ proposal last week for socialist-style price controls to counter inflation.
While Goolsbee did not mention Harris by name – since the Fed is supposed to remain politically neutral – he did caution voters from placing too much trust in a ban on price gouging.
Goolsbee, who previously served as the chair of economic advisors during his “good friend” Barack Obama’s administration, said wages tend to move slower than prices — so a shock will send prices up first, then wages, before both fall back down.
“The difference between what’s happening to prices and what’s happening to costs, that can vary a lot over the business cycle,” Goolsbee said on CBS’ “Face the Nation.” “So I just caution everybody over-concluding from any one observation about markups.”
Harris proposed a price gouging ban on Friday, arguing that food suppliers and grocery stores are keeping prices artificially high despite lower production costs.
And while Harris noted that inflation has been cooling – US inflation last month rose 2.9% versus a year ago, below expectations – she said Americans are not seeing low prices in their everyday lives.
“Costs are still too high, and on a deeper level, for too many people, no matter how much they work, it feels so hard to just be able to get ahead,” Harris said during a campaign stop in Raleigh, North Carolina.
Former president Donald Trump ripped into the price gouging plan, saying Harris has gone “full Communist.”
Most voters said the economy is one of the most important issues to them ahead of the 2024 elections, according to a poll conducted in August by The Economist/YouGov.
So both Harris and Trump have been vying to win over inflation-battered voters.
Trump has suggested raising tariffs on all imports, especially Chinese imports.
“A tariff is a tax on a foreign country. … It’s a tax on a country that’s ripping us off and stealing our jobs, and it’s a tax that doesn’t affect our country,” Trump said during a Pennsylvania rally on Saturday.
But Goolsbee forewarned that Trump’s policies might not hamper inflation, either.
“Tariffs raise prices,” Goolsbee said. “A one-time increase in cost will raise prices but is not an extended inflationary thing.”
Economists have warned that Trump’s policies may reheat inflation. Goolsbee said higher tariffs would not necessarily lead to an inflation flare up, but they would raise producer costs and consumer prices in the short term.
“Whether you want to call that inflationary or not, they raise costs and they raise prices,” he said.
Meanwhile, investors are hoping the Fed will issue highly anticipated interest rate cuts in September.
The Fed is preparing for its annual meeting in Jackson Hole, Wyoming on Thursday.
Goolsbee is not a voting member of the Federal Open Market Committee, which has the power to cut rates. But he said rate cuts are still a possibility.
“Everything is always on the table — there’s possibility of recession,” he said. “The last GDP growth number was higher than expected, so…that was one of the bright spots, but you’ve always got to worry about every contingency. That’s the job of the central banker.”
