Fed's Goolsbee Warns Rate Cuts Could Be Delayed Until 2027 Due to Oil Price Shock

Key Points

• Goolsbee previously expected multiple rate cuts in 2026 but now sees a delay to 2027 due to persistent high oil prices.
• The Fed's 2% inflation target is being challenged by the energy price shock from the Iran-U.S. conflict.
• Other Fed officials, like Mary Daly, are also evaluating scenarios based on oil price duration.

Full Details

Chicago Federal Reserve President Austan Goolsbee warned on Tuesday that the ongoing energy price shock from the Iran-U.S. conflict could delay the Federal Reserve's first interest rate cut until 2027. Goolsbee, previously among the more optimistic Fed policymakers, noted that if high oil prices and inflation persist, the timeline for resuming rate cuts would be pushed out of 2026. This shift reflects concerns that the conflict's impact on energy costs is complicating the Fed's path to bringing inflation down to its 2% target. The comments come as gasoline prices have surged above $4 per gallon, adding to consumer inflation pressures. San Francisco Fed President Mary Daly also indicated that the central bank is assessing various scenarios based on how long oil prices remain elevated, with a rate hold or cut being more likely than a hike.