everyday essentials like groceries and gas are climbing.

Low wages are remaining largely stagnant.

>> And that's being especially felt in Chicago, which has the highest inflation rate in the nation.

According to Wallet Hub report, Chicago's rate sits at 4.3% outpacing the national average of 3%.

It comes as the Trump administration is promising to impose sweeping tariffs and push out much of the immigrant workforce.

Joining us with more on the local economic landscape is Austan Goolsbee, president of the Federal Reserve Bank of Chicago.

Thank you for joining us.

Welcome, Thank you for having So as we mentioned, you know, should have those leading the nation in inflation, followed by San Diego, Boston, Honolulu and San Bernardino, California.

What would you say?

What we know about what is driving high inflation locally?

Well, look, this is a category you never wanted to even be in the in the running and to be number one is is disappointing.

>> The thing to remember is this isn't a comparison of cost.

How expensive is this city versus another city?

This was the inflation rate for the year and for fun.

Actual physical goods.

They can be shipped from place to place of the cross city inflation rate largely reflects housing price inflation in transportation costs, airfares, and that sort of thing.

And while ours was the highest for this past year that followed some previous years, whereas, you know, are house price inflation was not as high as as some of the other cities so that that does not mean that we're paying more for eggs and bread and milk.

Then our neighbors in San Diego.

Yes, True.

The cost of living is higher in California in New York City bunch of places to before a big city, relatively modest cost.

But the inflation rate was the highest of all of a major metro areas.

Like I say, you never you never wanted to win that when when that distinction.

Here we are.

So, you know, obviously many consumers were already noticing that, you know, that it's costing us more in the checkout line at the grocery store.

And I think a lot of consumers want to know.

>> Winds are going to get better what to get hate to see lower price.

So the thing is the Federal Reserve.

Has 2 jobs given to it by the law and the Federal Reserve Act to stabilize prices and maximize employment.

>> And on prices, we've interpreted that to be get the inflation rate to 2%.

That is the how fast the prices grow year-over-year.

We get to 2%.

That's different than the question my mom would ask, which is one of the price is going to go back to what they were in 2019 or if you back up farther, I bought my grandfather would never take us to the movies because in his mind, the movies were supposed to cost a nickel.

That's how much movies, because when he was again and we all know that's not going it's not going to happen.

So the thing about the Fed, we have an inflation target, not a price level.

Target, which is just a different way to say if you want the prices to go back to what they were in 2019, you would have to have very substantial deflation.

And the only way that we know how to do that is if wages went way down and nobody wants ways to go down.

So in in our world, in the central bank world, we're just trying to get the the the inflation rate to 2%.

And we would like incomes to be growing faster than prices.

And lately that has been happening.

This number for Chicago's a little troubling because that it to have an inflation rate of 4.3% Is right around or even above what average wages have been growing so that that's the area of concern.

>> So you can have inflation slowdown, but are prices will maybe remain the same?

happened.

Yeah.

The price price is if we got inflation to 2%, the central bank is going to say that's what we that was our goal.

People are still going to see that the prices are going up 2% from where they were the previous year.

The key question is our incomes, real income.

That is your standard of living rising.

And we went through a period where I don't need to tell you or anybody else that wasn't happening.

The job market was strong but wages were going up less than prices and that what was the centerpiece of people's anger about inflation.

So we also know President Trump, he plans to impose 25% tariffs on goods from Canada and Mexico, which experts warm Warner, economic experts are warning.

>> That's going to be, of course, another hit to consumers.

Pockets.

You're probably limited in what you can say here.

But what is your reaction to the administration's proposals?

Look, as you say, the feds and we're in the monetary policy business of setting interest rates.

So we don't say what's a good fiscal policy tax policy, tariff policy, Congress and the president can do whatever they want to do.

But I always say it's our Midwest motto.

There's no bad weather.

Only bad clothing.

We look at the conditions and decide on what jacket to wear.

So if the administration and tax policies that drive up prices.

By law.

The Fed has to think about anything that raises prices or affects employment.

That's in our mandate.

If they carry out tariffs of the form.

On intermediate goods.

That is on things in the supply chain, steel, aluminum, things that are used in the making of other products.

That will.

Have an impact on prices outside of just those specific goods themself and the thing to note in Chicago, the state of Illinois and really the whole Midwest.

was significantly more manufacturing intensive.

Then the rest of the national economy.

So tariffs will affect Illinois much more then than that, the average economy.

I think of the 50 states were about 6th or 7th in impact of the tariffs, depending how big they are or on what countries they apply And as president of Federal Reserve in Chicago in this region.

Is that a concern, concern love It's not that coming straight for me.

I was just few days ago out at the automotive in Pie Insight.

Symposium that the Chicago Fed runs in in Detroit.

Talk to a lot of major auto executives, the auto industry, as you might imagine, it's the mother of all supply chains.

One car can have up to 30,000 different parts every one of them has its own supply chain.

And we talked to major suppliers who expressed.

There are concerns about if tariffs came in, how big would they be and how rapidly would they be passed through on to consumers and a lot of people saying they thought it could go straight on to consumers.

Others saying they thought the for the suppliers that the auto manufacturers would and would not give them a higher prices so they might have to eat it.

So there's a lot of uncertainty, lot of kind of dust in the air and before the Fed can can go back to cutting the rates.

I feel.

And have expressed that we got to get a little dust out of the air to have abs, more clarity understood and before we move on, let's let's make sure that our viewers understand and have a sense of, you know what it is.

The Federal Reserve Bank of Chicago does and how your work influences the region's economy.

touched on a bit of it.

Look there.

There are Federal Reserve Act set up a system with some DC members of the Fed who are political appointees and confirmed by the Senate.

Jay Powell is the chair, but in 1913, when they pass the Federal Reserve Act.

As today.

Fundamentally, people did not want Washington, D.C., and New York City to control the whole financial system.

So there are 12 reserve banks spread around the United States, one of which is in Chicago in kind of covers heart of the Midwest and that the Chicago Federal Reserve Bank is a bank to the region's banks so we'd ever do a bunch of the plumbing of the financial system.

We are the supervisors of banks.

We're on hundreds of millions of dollars of cash in and out of the bank.

We have a big vote with with money in it and we run payments.

Ach, direct deposit.

Thad, why are a whole bunch of financial services as well as going to Washington and voting on monetary policy and people still are using cash record.

People going you it's not Devin Grant and and whatever else you may use.

So health care, obviously a major industry in the Chicago area.

And since the president took office in January, we've seen massive federal cuts to sciences research.

>> Are there concerns about sort of this?

What could be a potential purging of the region's major employers and what that could do to the economic outlook?

I mean, anything that affects employment.

>> We have to think about the law tells us we have to think about it.

It's still to be determined collectively.

What does the entire policy package?

Entail if there are to be spending cuts and government, tax cuts and tariffs and immigration policy and geopolitics.

The war in Ukraine.

The Middle East.

What happens?

The commodity prices, all of those taken together.

Are just the background conditions.

And I guess the way I'd say it is the conditions are changing all the time.

Yes, it feels like there are a lot of uncertainties about policy right now.

But the the FOMC needs every 6 weeks to determine interest rates it meets at frequently precisely because we know the conditions are constantly changing and so we we just take it as it comes and dread try to adjust the policy for We had state Representative John Cabello joining us here last week to discuss and establishing a local version of that here in Illinois.

>> He argues the government is not meant to be a job creator.

Here he is.

>> Government is supposed to create an environment for private business to flourish.

The more government agencies that we have going to be more burden the taxpayers.

So what we need to do is we need to create an environment for private business to flourish and read and get away from government jobs so that that way the of the taxpayers are burned as much when you have private industry doing the taxpayers are going to win.

>> Your reaction to the assessment?

Well, look, this is straight down the line, fiscal policy decision that Congress, the president and the every everyone can sort out what their view is on that.

I totally agree that if you just look at the data.

90 plus percent of growth in this country has nothing to do with Washington.

More state government.

It comes from the private sector.

Our goal of the Fed.

We got to fight inflation and we got to maximize employment.

We we succeeded very well on the job market site.

That's been the strongest thing in the economy and partly before I got there.

But partly since I've been there where we have failed is on getting inflation down.

That's clearly been the worst part of the economy has been the cost of living and the inflation affordability crisis.

So.

If Washington and and or the state.

We'll sort out what their policies are.

It will be a lot easier for us to then determine what is the appropriate response for on interest rates.

But in this period where there's they're hammering that out.

We got to take a little bit of a wait, wait and see posture.

We run the scenarios.

I mean, if you ask me what, what keeps you up at night?

The job of central bank is not to sleep at night.

nap in the daytime.

You know, so hopefully nothing they will contemplate will be something that we haven't thought of.

But we're still just in this running scenarios were fighting inflation and maximizing employment.

That's