Fed’s Goolsbee warns rate cuts may be delayed until 2027 on Iran war oil shock

Chicago Fed chief, Austan Goolsbee, warns that the Federal Reserve may need to keep interest rates on hold until 2027 if the Iran war continues to keep oil prices high, leading to inflation above target levels. This could delay expected rate cuts and potentially even lead to rate hikes if inflation remains elevated. Fed officials are concerned about the impact of war-related energy price disruptions on inflation, with projections showing higher inflation levels for 2026. Traders have adjusted their expectations for rate cuts in response to elevated oil prices during the conflict. Goolsbee emphasizes the need to bring inflation back to 2% and highlights the challenges the Fed faces in achieving this goal amidst war-related uncertainties. Fed Chair Jerome Powell also acknowledges the limited flexibility to cut rates until there is clear evidence of sustainable inflation levels.