Chicago Fed chief put inflation ahead of jobs, unsettling a mortgage market banking on cuts
Inflation risk, not the job market, sat at the center of Federal Reserve thinking as Chicago Fed president Austan Goolsbee laid out a path that could still lead either to rate cuts or to a fresh hike, depending on how the Iran conflict and oil prices play out.
His comments landed as bond markets repriced toward a higher for longer outlook and US mortgage rates edged back up after a brief retreat.
The renewed hawkish tone followed weeks of market whiplash around the war in the Middle East, with Brent crude briefly topping $119 a barrel and US Treasury yields climbing on fears of a lasting energy shock.
That move pushed the benchmark 30‑year mortgage rate to about 6.22%, its highest level in more than three months, after dipping below 6% earlier this year.
“With high gas prices threatening to influence consumer expectations, at the moment I think inflation has got to be a little ahead of employment” as a Fed priority, Goolsbee said on CNBC’s Squawk Box.
“To have already been at an inflation rate that was uncomfortably high...and now to add something that might be a lasting gasoline price shock, this is an intense moment and we have to hope that this does not prove to be a lasting impact on the economy,” he said.
“We could be back to the environment with multiple rate cuts for the year if inflation behaves,” Goolsbee said.
“I could see circumstances where we would need to raise rates if it was going a different way, and inflation was getting out of control.”
The evolving Middle East conflict “definitely threw a wrench into the plans,” he added, stressing that policymakers still need to “see progress” toward 2% inflation before easing.
In earlier comments, Goolsbee urged “patience on rate cuts” while inflation hovered near 3%, and warned that inflation could “come roaring back” if political pressure on the Fed undermined its independence – a scenario that could push term premiums and mortgage rates higher again.
Fed’s Waller slams brakes on rate cuts as Iran war rattles outlook
Meanwhile, Federal Reserve governor Christopher Waller walked into last week’s meeting ready to break ranks. The February jobs report showed a loss of 92,000 positions, and for a policymaker who has worried for months about a “clearly weakening” labor market, it looked like time to cut.
Instead, a new Middle East war and a sudden oil shock pushed him back toward the consensus – and extended the wait for rate relief that mortgage professionals hoped would firm up this spring.
Federal Reserve Vice Chair for Supervision Michelle Bowman, however, signaled a softer trajectory. “Of course, I’ve written three cuts in before the end of 2026 to hopefully support the labor market. I’m still concerned about...the job market,” she said.
She also pointed to the Iran conflict as an open question for policy.
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