WASHINGTON: Federal Reserve Governor Lisa Cook on Wednesday said she is more concerned about stalled progress on inflation than a weakening labour market, a strong signal that she will not support another interest-rate cut until price pressures that built last year due to tariffs begin to recede.
“At this time, I see risks as tilted toward higher inflation,” Cook said in remarks prepared for delivery to the Economic Club of Miami, a week after she joined the majority of her fellow US central bankers in a 10-2 vote to leave the policy rate steady.
The Fed cut short-term borrowing costs three times last year, to its current range of 3.50 per cent-3.75 per cent.
Those reductions will continue to support a now stabilized labour market, she said. Unemployment, at 4.4 per cent in December, is well below the 50-year average of 6.2 per cent that preceded the 2020 Covid-19 pandemic, she noted.
But progress on inflation, which the Fed targets at two per cent, has stalled, running at about three per cent at the end of last year after stripping out volatile food and energy prices, she said.
“Such a plateau is frustrating after seeing significant disinflation in the preceding few years,” she said.
And while she is optimistic that the effect of tariffs on goods prices will recede and allow inflation to come back down again this year, there is “much uncertainty” over that path, including future tariff policy and whether inflation expectations may become entrenched.
“After nearly five years of above-target inflation, it is essential that we maintain our credibility by returning to a disinflationary path and achieving our target in the relatively near future,” Cook said. “Until I see stronger evidence that inflation is moving sustainably back down to target, that is where my focus will be, in the absence of unexpected changes in the labour market.” Cook has voted with Fed Chair Jerome Powell and the majority of Fed policymakers on every interest-rate decision she has taken part in since she started the job in 2022.
President Donald Trump, who has pressured the Fed to slash interest rates sooner and faster than it has, last year tried to oust Cook over alleged misstatements on her mortgage applications, an effort that she has sued to stop in a case currently before the Supreme Court.
Trump has nominated former Fed governor Kevin Warsh to succeed Powell when his chair term ends in mid-May, in part because Warsh supports the rate cuts that Trump wants. (Reporting by Ann Saphir, editing by Deepa Babington)
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