On July 15, Fed Governor Lisa Cook stated that the threat of ongoing price increases now exceeds the concern over a softening job market. She spoke at 1:01 PM EDT. "If we do not see signs of disinflation soon, I am prepared to act," Cook said. "I am fully committed to reaching our inflation target, and this commitment is unwavering."
June's consumer-price report showed prices fell, a milestone not achieved in half a decade, according to recent data. However, Cook noted that these numbers, combined with other data released this week, indicate inflation remains about 2 percentage points higher than the Fed's target based on its preferred measure.
"Inflation readings this week were just for for one month, and one month is not a trend made," Cook said. "So we have to be very careful about monitoring this in real time."
At their meeting last month, the Federal Open Market Committee held the benchmark interest rate steady for the fourth straight time. New economic projections from the committee indicated that roughly half of its members anticipate at least one interest rate increase this year. An increasing number of policymakers have voiced worries about inflation that has stayed above the Fed's goal for five years.
Get the market news that matters in a five-minute read with Market Briefs, our free daily newsletter
Earlier Wednesday, Fed Chair Kevin Warsh told senators he remains committed to achieving price stability, but countered the idea that the AI boom will cause lasting inflation.
Cook cited ongoing AI investments, supply disruptions from tariffs, and the US-Iran conflict in the Middle East as possible sources of sustained price increases. While the Middle East conflict pushed energy costs higher earlier this year, Cook noted that climbing goods prices, in her words, "underscore the fact that the recent acceleration in inflation is not only an energy price story."
"The high inflation we have seen boosts inflation going forward," she warned.
Cook stated that the risk balance between inflation and employment has changed since last year, when she gave slightly more weight to labor market concerns. Now, "nearly all indicators point to stability," in the labor market.
"In fact, I see few reasons that today's labor market has more risk than a year earlier," she said. "Therefore, risks on the employment side have diminished. The balance of risks has teetered toward the inflation mandate."
"This sign of public confidence in the Fed is reassuring, but it does not mean that we can take our eye off the ball," Cook said. "The FOMC can take its time, I can take my time to observe more data to understand whether it's really restrictive or not," Cook explained during a Q&A following her speech.
Cook characterized the Fed's present monetary policy as mildly restrictive and noted that officials can take time to evaluate new data.
Join Market Briefs, our free daily newsletter, for a quick daily rundown of the markets
