STEVE INSKEEP, HOST:
Consumer spending is one of many factors the Federal Reserve considers as it monitors the health of the economy. The Fed uses that information to make decisions on interest rates. A Fed committee has its latest meeting about this at the end of the month amid demands by President Trump to lower rates. One member of the committee that will make that decision says the economy generally seems strong. But he warns that Trump's tariffs make it hard to know what to do. Austan Goolsbee is president of the Federal Reserve Bank of Chicago.
AUSTAN GOOLSBEE: You ever have your battery start going out in your smoke alarm?
INSKEEP: Yeah.
GOOLSBEE: And it's like 3 o'clock in the morning and you hear, beep.
INSKEEP: Yes, far too many times.
GOOLSBEE: Then you're up and you're like, hey, maybe we could just go back to sleep. But that's not going to work 'cause 10 minutes later, it's going to beep again. So you're kind of out there waiting. We had a big Fed Listens event at the Chicago Fed. and a bunch of businesses from around the Midwest came in to talk about conditions. And one of the construction firms said this is really a pencils-down moment for us because we just can't proceed to the next part of the test until we get some clarity.
And if it's, we're going to revisit it every 30 days and announce new ones - 50% on copper, 50% on Brazil, go back and add more to Canada - it adds question marks. Tariffs are just one condition. Conditions change all the time. But that means, as we go into the fall, the most important task that the central bank has is to try to get the through line of what's happening in the economy. And that through line is solid. But the more dust in the air, the harder it is to tell that you're still on that path.
INSKEEP: I'm listening to you and trying to interpret a little bit. It seems you're telling me that an interest rate cut might be unwise because things are unpredictable. And also, maybe an interest rate cut is not necessary because in spite of all the uncertainty, the economy has been OK.
GOOLSBEE: Now, I'd be careful. I'm not going to let you put words in my mouth.
INSKEEP: OK.
GOOLSBEE: And I never want to tie...
INSKEEP: You say it your way.
GOOLSBEE: Well, I never like tying our hands as a body before we have the meeting, before I hear what my colleagues have to say and before we get all the data. And it is literally the largest table that I've ever seen in my life in this room where the Federal Open Market Committee makes the decision.
INSKEEP: Yeah.
GOOLSBEE: There's plenty of room for everything to be on the table.
INSKEEP: Is that an imported table, by the way, or domestically made?
GOOLSBEE: I hope not.
INSKEEP: OK.
GOOLSBEE: But I can crawl under there and see where the made-in sticker - what it says. So as I say, if you get to stable full employment, if we're on path to inflation getting back to 2%, then I think where rates are going to settle is a fair bit below where they are today.
INSKEEP: I will note that the most recent inflation report had it going up a bit, and it's well above 2%.
GOOLSBEE: It's above 2%, and it's trending the other way.
INSKEEP: Many people know that President Trump has been publicly pressuring Chairman Powell to cut interest rates and even acknowledged in recent days that he talked about firing him. How, if at all, do you think about the political pressure on the Fed when you make a decision on interest rates?
GOOLSBEE: That doesn't go into the thinking on interest rates. And the committee puts out the minutes, and then later, the word-for-word transcript. You can see what goes into the - for yourself what goes into the decision on interest rates. That said, it pains me to see public discussion that maybe there shouldn't be central bank independence and that we should politically determine the interest rates in the short run. That's a mess. Just look around the world at countries where that is true. It's not a pretty picture.
INSKEEP: Let me put the counterargument to you so that you can answer it, in broad terms. Someone like the president's budget director. Russ Vought, if he were here, he might say, I just don't believe that you experts are experting over there. I think that you're applying your political agenda. He has expressed on NPR deep skepticism of independent experts.
GOOLSBEE: I'm not counting on expertise. I'm just telling you if the central bank does not have independence from political interference, inflation is coming back. And we will get inflation back to 2%. And the Fed must be independent. All rich countries' central banks are independent for this same reason, that sometimes a central bank has to do what is in the short run not politically popular to get inflation back to 2%.
INSKEEP: Austan Goolsbee, president of the Chicago Fed. Thanks for your time.
GOOLSBEE: Thanks. Great talking to you again, Steve.
INSKEEP: And thank you for listening to your public radio station, which brings you MORNING EDITION and All Things Considered - your station in your community, supported by this community. Its staff is covering the news and working to be fair, no matter what politicians may say or do. Listen on your smart speaker, on the NPR app or on this public radio station.
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