Two prominent Federal Reserve officials are raising red flags about inflation, describing it as a more pressing concern than employment issues while expressing support for maintaining tighter monetary policies.
During a recent podcast interview with The Indicator from Planet Money, Cleveland Federal Reserve President Beth Hammack and Chicago Fed President Austan Goolsbee were asked to evaluate economic conditions using a color-coding system ranging from crisis-level red to all-clear green.
Goolsbee painted a concerning picture of inflation trends, rating them “at least orange. Orange with a chance of meatballs; it hasn’t been great,” as gasoline costs continue climbing. “I was optimistic that we would get back to this path to 2% inflation, but yikes, it’s going from orange to red lately — we had tariffs increasing prices, that was supposed to go away, kind of didn’t go away, and now we add another stagflationary shock on top ….it’s a troubling moment.”
Hammack shared similar worries about price increases, noting inflation has exceeded target levels for five consecutive years and has remained “basically moving sideways” over the past two years. She described the situation as “definitely at the brighter, the more vibrant color orange: I don’t know if that’s burnt orange, burnt sienna: my Crayola box is a little bit old.”
The Wednesday interview took place before Friday’s release of March employment data, which revealed the largest monthly job gains since Donald Trump returned to the presidency in January. Unemployment dropped to 4.3%, though this decline was primarily attributed to significant numbers of workers exiting the labor force.
Regarding employment conditions, Hammack views the unemployment rate as the most reliable gauge, currently sitting near what she considers full employment levels. Despite calling it a “fragile type of balance,” she rates the employment outlook as yellow to green — possibly “chartreuse,” she noted, “or actually it’s like the Diet Mountain Dew” preferred by a colleague on the Federal Reserve’s policy committee.
Hammack described the financial system as “generally green” and stated the economy appears stable from a financial perspective, even with stock market declines following the Iran conflict.
Goolsbee took a more reserved stance on both employment and financial conditions, assigning a “yellow” rating to the job market due to its current state of minimal hiring and firing, which he attributes to ongoing economic uncertainty.
Concerning financial systems, while satisfied with payment mechanisms, he expressed greater concern about asset valuations. “It does look like there is a lot of frothiness,” he observed, questioning whether current conditions reflect genuine productivity gains or represent a bubble ready to burst.
“Maybe that’s yellow? You are never going to hear me say the word ‘chartreuse,’” he concluded.
