Federal Reserve Governor Cook: I am prepared to raise interest rates if inflation does not ease.
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Federal Reserve Governor Lisa Cook issued a hawkish signal, stating that if the process of cooling inflation does not proceed as expected, she is prepared to raise interest rates.
Speaking at an event at Stanford University on Wednesday, Cook said she currently favors keeping rates unchanged and expects inflation to resume its decline in the coming months, but she also emphasized that inflation still faces upside risks. In April, U.S. consumer prices saw their largest increase since 2023, with gasoline, rent, and food prices all rising across the board.
Cook’s remarks further reinforced the market’s expectations regarding the Fed’s policy path. With the labor market remaining relatively stable, accelerating inflation has replaced employment concerns as the policy issue officials are prioritizing.
Oil Prices and AI Boom Drive Inflation, Rate Hike Back on Agenda
Cook stated that inflation staying above the Fed’s 2% target for five consecutive years could cause price pressures to become embedded in pricing and wage-setting behavior. She said: “Therefore, if the expected slowdown in inflation does not materialize in time, I am prepared to raise rates.”
Minutes from the Fed’s meeting last month showed that most officials warned that if inflation remains persistently above target, the central bank may need to consider raising rates. At the meeting, officials kept the benchmark rate unchanged in the 3.5% to 3.75% range.
Cook pointed out that ongoing U.S.-Iran tensions continue to disrupt energy markets, exerting upward pressure on inflation and serving as an important source of short-term price pressures.
Meanwhile, she listed the investment boom in artificial intelligence as another potential source of price shocks. Cook noted that the $1.5 trillion AI investment wave has already impacted the prices of chips and other high-tech equipment, and the transmission effect of this factor on overall inflation is worth continued attention in the future.
Regarding the labor market, Cook’s assessment was relatively cautious. She believes the current employment market is generally stable, but also noted that downside employment risks are at a “relatively high level” and that long-term observation is needed regarding the structural changes AI may bring to the economy.
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