Detroit — Austan Goolsbee, CEO of the Federal Reserve Bank of Chicago, said Thursday if economic conditions persist as they have, he expects continued federal fund rate decreases over the next year or so — but policy changes could make that decline slower.

"I still think my ultimate where-we're-going-to-land is a fair bit below where we are today," Goolsbee told media during the bank's Automotive Insights Symposium in Detroit. "But the speed at which we get to that, it may be a little shallower, because there are these uncertainties."

Goolsbee highlighted strong economic indicators that support the case for interest rate declines. He said it appears like the country is settling at full employment, consumer demand remains strong, and there's been improvement on inflation toward the Federal Reserve's 2% target, including sustained progress on housing inflation. But visibility into economic conditions has gotten "foggier," he said.

At the end of 2024, unemployment dropped to 4.1%. The January jobs report is expected to be shared Friday. The consumer price index rose 2.9% over the last 12 months, the U.S. Bureau of Labor Statistics said last month. Consumer sentiment in December rose for the fifth consecutive month and reached its highest value since April 2024, according to the University of Michigan's index.

But natural disasters like the wildfires in southern California last month, geopolitical tensions and other potential policies and how they affect productivity, commodity pricing and other factors could cause greater caution from central bankers, Goolsbee said. President Donald Trump this week instituted 10% tariffs on China and also paused 25% tariffs on Canada and Mexico from taking effect until March.

"To the extent that we're not going to get in an escalating trade war that has a direct impact on the supply chain," Goolsbee said on the pause, "that gives me some relief that the worst cases that I'm describing on the supply chain — it's just going to be less money. The more we go without an abrupt switch where we're trying to figure out whether inflation is coming from tariff policy versus overheating, the more able we are to just reflect on the underlying conditions."

Overheating refers to conditions in which demand exceeds supply. Tariffs could create a supply shock, but whether that is a temporary situation or more permanent circumstance is what central bankers should take into consideration, Goolsbee said.

"There's nothing you can do about the price of oil," he said as an example, "but if the price of oil going up leads to wage-price spiral or leads to change in inflation expectations, that's what the central bank should be concerned about."

In the auto sector, demand appears to remain strong and average transaction prices are approaching $50,000, said Erin Keating, executive analyst at Cox Automotive Inc. The auto retail services provider is forecasting 16.3 million U.S. new vehicle sales in 2025, up from 15.9 million last year.

"There are plenty of things that could disrupt this, but ... the data tells us that overall, incomes are rising and inflation is going in the right direction," Keating said during the symposium. "If we actually end up on the course, this year is not going to be that bad, at least for the automotive industry as of right now."

Goolsbee emphasized the role that conversations he's having with business leaders, including from automakers and suppliers, are playing in how he thinks through uncertainties like tariffs. He noted the pandemic revealed the differences in the lengths of the time it can take for the impact of such events to be felt in different industries.

"On average, the OEMs tend to be saying, 'Yeah, we'll probably pass them through.' It sort of depends on the consumer willingness to pay," Goolsbee said about potential response to tariffs. "But we've gone through this period where they've been willing to absorb price increases. They're angry about it, but they still got to buy a car."

The fear for suppliers, he added, is that automakers won't be able to offer cost relief.

"They're afraid of that squeeze, that the tariffs will immediately raise the cost of foam, the cost of steel, the cost of electronic components, whatever, and that they won't be able to sell it for any more," Goolsbee said. "I can see why they're concerned. If that is what happened, it'd be bad for their industry. It would be less bad, ultimately, for the immediate impact on consumer inflation. But it's got some complexity to it."