A top Federal Reserve official has suggested that the central bank may need to cause economic hardship, including higher unemployment, to bring down stubbornly high inflation. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, made the remarks during a speech in London. He explained that the Fed is dealing with a series of ongoing supply shocks—such as increased oil prices due to the Iran war and trade restrictions—that have pushed inflation higher. Normally, the Fed would wait for these shocks to fade and for inflation to decrease naturally. However, Goolsbee said that with these persistent issues, the Fed has little choice but to increase interest rates. Raising interest rates makes borrowing more expensive, which can reduce consumer and business spending. Goolsbee argued that this is necessary to bring demand in line with the reduced supply, which should help bring inflation back to the Fed's 2% target. "The only way to bring inflation down is to raise rates and narrow the gap between supply and demand," he said. He acknowledged that this approach would likely lead to higher unemployment in the short term, creating a difficult trade-off between controlling inflation and maintaining strong job growth. "It’s going to be painful," Goolsbee said in later remarks to reporters, adding that the situation would "necessarily be painful." Goolsbee’s comments contrast with those of Fed Chairman Kevin Warsh, who recently stated that the Fed does not believe it needs to harm the labor market to achieve its inflation goals. This comes after the Fed raised its key interest rate for the first time in three years, bringing it to about 3.9%. Warsh emphasized that the Fed aims to achieve its inflation target without causing significant damage to employment. Historically, raising interest rates has often slowed economic growth and even triggered recessions. However, in 2022-2023, the Fed sharply increased rates, and inflation declined without a major rise in unemployment or a significant economic slowdown. This has left the Fed in a complex situation, balancing the need to control inflation with the risks of economic pain.