Fed official suggests rate cuts possible if Trump tariffs are removed
3 Min Read
Speaking at an event in Michigan, Chicago Fed President Austan Goolsbee noted that lifting the White House's April 2 tariff package could create the conditions for a more stable economic environment.
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The Treasury Department building is seen, March 13, 2025, in Washington. (AP Photo/Alex Brandon, File)
A senior Federal Reserve official said Thursday that the US central bank may consider cutting interest rates if the Trump administration rolls back recently imposed tariffs, which have introduced uncertainty into the economic landscape.
Speaking at an event in Michigan, Chicago Fed President Austan Goolsbee noted that lifting the White House's April 2 tariff package, which placed a 10% base levy on most imports and imposed higher rates on key trading partners, could create the conditions for a more stable economic environment. The measures were temporarily paused to allow for negotiations.
"If you have stable full employment and inflation going to target, rates can come down to where they would eventually settle," Goolsbee said. He added that Fed policymakers expect long-term rates to be "well below" their current levels.
.@ChicagoFed President and Chief Executive Officer @Austan_Goolsbee speaks with @Baruah_DRC_CEO at #MPC25.
, Detroit Regional Chamber (@DetroitChamber) May 29, 2025
Watch the conference live at:https://t.co/EhmmcpTKKe pic.twitter.com/OFaJoQYyKy
Tariff turbulence
The US Court of International Trade ruled on Wednesday that President Donald Trump overstepped his executive authority with the sweeping trade restrictions, blocking the tariffs from taking effect. The White House has vowed to appeal, framing the ruling as an obstacle to its economic strategy.
Goolsbee, who is a voting member of the Fed's rate-setting committee this year, highlighted that the pre-tariff economic environment showed signs of strength, with stable employment and inflation nearing the Fed's 2% target. That trajectory, he suggested, could resume if tariff-induced volatility is removed.
"So if we can get that out of the air, I do still think that underneath there is a strong dual mandate economy," he said, referencing the Fed's responsibility to maintain price stability and full employment.
Still, Goolsbee warned that extended policy uncertainty could undermine the Fed's outlook. "The longer we go contemplating really big changes, like some of the ones that have been discussed, the more that fades into the background," he said.
Read more: Former US Treasury Secretary says Trump tariffs policy 'misguided'
The Federal Reserve has faced growing political pressure in recent months, with Trump publicly lashing out at Fed Chair Jerome Powell for resisting rate cuts.
In April, Trump declared Powell’s "termination cannot come fast enough," only to later walk back the threat. The US Supreme Court has since reaffirmed the Fed chair’s legal protections, ruling that the president cannot remove Powell without cause.
Despite the tensions, the Fed continues to monitor inflation and labor data closely. For now, Goolsbee’s comments suggest that a more accommodative monetary stance remains possible, but only if the administration reins in its tariff ambitions and restores policy predictability.
