TOKYO - Chicago Federal Reserve President Austan Goolsbee said Wednesday the Bank of Japan faces the risk of being too late in raising interest rates at a time when consumer prices are rising.
"There's definitely, there's always a risk that you're behind the curve, and the longer it goes, with inflation above your target, the bigger the risk of being behind the curve," Goolsbee said in an interview with Kyodo News in Tokyo.
Speaking before the Japanese central bank makes a decision over a rate hike at the next June meeting, Goolsbee said the BOJ should be mindful that inflation does not rise to the point where it becomes "much more difficult to get rid of it."
For the fiscal year that ended March, Japan's core consumer prices, excluding volatile fresh food, increased 2.7 percent from a year earlier, above the bank's 2 percent target.
In April, the bank sharply raised its inflation outlook to 2.8 percent in fiscal 2026 through next March, expecting surges in crude oil price from the Middle East to impact prices of products and services in resource-poor Japan.
Goolsbee, who was visiting Tokyo to take part in a two-day conference organized by the BOJ's Institute for Monetary and Economic Studies through Thursday, said he is "concerned" that inflation in the United States will remain for a much longer period
"If this is going to be persistent or getting worse the way it has the last couple of months, it's entirely possible that rates would have to go up," said Goolsbee, who is not a voter on the Fed's policy-setting meetings in 2026. He will vote in 2027.
He noted that inflation has been rising in the United States not only due to elevated oil prices and higher U.S. tariffs but due to recent price gains in the services sector, which he described as a "persistent type of inflation...(that) doesn't tend to go up quickly and go down quickly."
Regarding oil prices, he said he worries that they will remain high even if the Iran war ended today, as a "bunch of the infrastructure in the Middle East" have been attacked and restoring it is expected to take time.
The Fed joined the BOJ in holding rates steady at its last meeting in April, with the U.S. central bank's minutes showing deepening inflation concerns among a growing number of policymakers, leading many investors to bet on a rate hike this year.
Goolsbee also stressed the importance of central banks remaining independent, with U.S. President Donald Trump pressing the Fed to cut interest rates.
What would "motivate" the decisions of the new Fed Chair Kevin Warsh is "not what does the outside voices say, what does the stock market say," the Chicago Fed chief said.
In Japan, market watchers say Prime Minister Sanae Takaichi, a fiscal dove, appears inclined against a BOJ rate hike, as evidenced by appointing candidates who are regarded as favoring monetary easing as members of the Policy Board.
On Japanese authorities' suspected intervention into the foreign exchange market to curb the fall of the yen against the dollar earlier this month, Goolsbee said it is not easy to change exchange rates set mostly by the market.
"If the government is trying to set a different exchange rate than what the market believes is true, that gets very expensive quickly," he said, referring to a market intervention.
