Austan Goolsby, President of the Federal Reserve Bank of Chicago, speaks at the 29th Milken Institute World Conference at the Beverly Hilton on May 6, 2026 in Beverly Hills, California.
Patrick T. Fallon | AFP | Getty Images
Chicago Fed President Austan Goolsby said Thursday that energy inflation caused by the Iran war is lasting longer than expected, causing a “stagflation shock” for Asian economies.
Speaking with CNBC’s Kaori Enjoji at the Bank of Japan’s IMES conference, Goolsby said that initial forecasts in the futures market expected energy prices to be “much lower” than current levels.
There are signs of progress in peace talks between the United States and Iran, and oil prices have fallen recently, but they remain well above pre-war levels.
International benchmark Brent crude oil futures rose more than 1.81% to $96 per barrel, while West Texas Intermediate futures rose 1.71% to $90.21 per barrel.
This compares to Brent’s price of $72 and WTI’s price of $67.02 the day before the US and Israel launched their attacks on Iran.
Mr. Goolsby also issued a warning for Asian economies, saying that because Asia is an energy importer, “this is more of a classic kind of stagflation shock.”
The Chicago Fed president, who voted against the Fed’s final rate cut in 2025, said he did so because he wanted evidence that inflation would not persist.
“I don’t regret voting against it at that meeting because it turns out that inflation is not as temporary as initially advertised,” he added.
Still, Goolsby said, if inflation starts to move back towards the Fed’s 2% target, interest rates “will eventually settle to levels well below where they are now.”
AI will “overheat” the economy
Asked about the potential for artificial intelligence to improve productivity, Goolsby said he was concerned that financial markets could get ahead of the actual economic benefits of AI implementation.
“My concern is that future productivity gains that will make us richer could fuel stock price increases as if they were increases in wealth today because we know we’ll be richer sometime in the future,” Goldsby said.
“That could encourage people to spend this wealth on things like the stock market, potentially overheating the economy in the short term before AI actually improves productivity.”
Goolsby said policymakers should keep an eye on signs that AI-related stock market gains could spill over into broader inflationary pressures.
“What I want people to look at is: Are we seeing a huge increase in consumer spending due to increased wealth in the stock market? Are we seeing investments in data centers driving up electricity bills for construction workers and having a short-term impact on inflation in the United States?”
He added that the same dynamics could eventually impact Asian economies, as new technologies are rarely concentrated in one country.
“If there is productivity improvement due to AI, it will soon be seen in Asian countries as well,” he said.
