Austan Goolsbee Is Worried the Economy Is Overheating

The Federal Reserve Bank of Chicago president, Austan Goolsbee, is worried the economy might be overheating again. In a conversation recorded just before Chair Jerome Powell’s 2026 Jackson Hole speech, Goolsbee laid out a careful but pointed case that the biggest risk right now is that inflation stops falling and starts rising—and that the Fed might not be restrictive enough to stop it. He also argued that many of the Fed’s communication tools, like the dot plot and press conferences, were built for a different era and should be reconsidered.

Why "restrictive" is harder to measure than it sounds

Goolsbee pushed back on the simple question of whether current policy is restrictive. The real federal funds rate—nominal rates minus expected inflation—depends entirely on what you think underlying inflation is. If inflation is still running above 3%, the real rate is lower than it looks. If inflation is heading back to 2%, the real rate is higher. R-star, the mythical neutral rate, is unobservable even in normal times. Goolsbee calls it “R Sasquatch”: you only know where it was after it has passed.