Don’t Expect Rate Cuts Soon: Fed Officials Paint a Grim Picture on Inflation in 2026

TLDR

• Two Fed presidents describe inflation as “orange” or worse on a color-coded scale
• Goolsbee says inflation is trending from orange toward red, citing tariffs and the Iran war
• Hammack notes inflation has run above target for five years and moved sideways for two
• Unemployment fell to 4.3% in March, but mainly due to workers leaving the labor force
• Both officials lean toward tighter monetary policy, not rate cuts

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Two senior Federal Reserve officials have warned that inflation remains a serious problem, using colorful language to describe an economy under pressure from tariffs and rising energy costs tied to the Iran war.

Chicago Fed President Austan Goolsbee and Cleveland Fed President Beth Hammack appeared together on The Indicator from Planet Money podcast. They were asked to rate different parts of the economy using a color scale, from green (all good) to red (house on fire).

On inflation, both landed firmly in the warning zone. Goolsbee said the outlook is “at least orange” and moving toward red. Hammack called it “vibrant orange,” saying inflation has been above the Fed’s 2% target for five years and has barely moved in two.

Goolsbee pointed to a combination of factors pushing prices up. Tariffs were supposed to be temporary, he said, but they stuck around. Now the Iran war is adding another layer of pressure on energy prices, particularly gasoline.

“It’s a troubling moment,” Goolsbee said. He described the situation as a stagflationary shock, where prices rise even as the broader economy slows.

Jobs Market Holds, But With Caveats

The March jobs report, released two days after the interview was recorded, showed the strongest payroll gain since President Trump started his second term. But the unemployment rate drop to 4.3% came mostly from workers leaving the labor force, not from more people finding jobs.

Hammack said unemployment is her key indicator, and at 4.3%, it is near where she sees full employment. She called the balance “fragile” but rated the labor market somewhere between yellow and green.

Goolsbee was more cautious, giving the jobs market a “yellow” rating. He said low hiring and low firing together signal that businesses are stuck in wait-and-see mode due to ongoing uncertainty.

Both officials’ comments point toward keeping rates steady or higher, rather than cutting them anytime soon.

Financial System Still Mostly Steady

On financial stability, the two officials diverged slightly. Hammack said the financial system is “generally green” despite stock market losses since the Iran war began.

Goolsbee said he’s comfortable with payment systems but more worried about asset prices. He said there is “a lot of frothiness” in markets and it is unclear whether that reflects real productivity gains or a bubble.

He rated the financial system “yellow,” stopping well short of Hammack’s green.

The interview was taped on Wednesday, April 2. The March jobs report was released on Friday, April 4, showing payrolls rose by the most since January 2025.

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