Federal Reserve Governor Lisa Cook stated that the Fed must rein in inflation back to its target level in the near term, which is crucial for maintaining its credibility. "Unless I see stronger evidence that inflation is sustainably returning to our target, this will remain my focus—provided, of course, there are no unexpected changes in the labor market," Cook remarked in prepared remarks for an event in Miami on Wednesday. The Fed's policy-setting committee held the benchmark interest rate steady last week within the range of 3.5% to 3.75%, following three consecutive rate cuts implemented by the end of 2025. While keeping rates unchanged, officials upgraded their assessments of the economy and labor market, signaling no immediate urgency for further rate reductions. Cook's comments come as U.S. President Donald Trump announced the nomination of former Fed Governor Kevin Warsh for the next Fed Chair. Trump has long called for substantial rate cuts from the Fed, a move that has raised concerns among many observers that the next Chair may struggle to uphold the Fed's commitment to controlling inflation. Warsh has previously indicated that the Fed has room to cut rates, arguing his belief that productivity gains can foster economic growth without fueling inflation. Cook expressed her support for last week's decision to maintain rates, as she currently views the "risks as tilted toward higher inflation." Her stance aligns with that of several other policymakers who have recently voiced caution—inflation has remained above the Fed's 2% target for several consecutive years. "After nearly five years of above-target inflation, it is imperative that we restore our credibility by returning to a path of disinflation and achieving our goal in the relatively near future," Cook emphasized. She noted that a lack of dynamism in the labor market "could leave it vulnerable to negative shocks," but still described the market as "broadly in balance," adding that the slight decline in the unemployment rate in December shows signs of stabilization. "Overall, uncertainty about the economic outlook remains high, but I believe last year's three rate cuts will continue to support the labor market," she concluded.
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