Federal Reserve Governor Lisa Cook indicated on Wednesday that she is more concerned about a halt in progress on inflation than about weakness in the labor market. This is a strong signal that she will not support another interest rate reduction until price pressures, which built up last year due to tariffs, begin to subside.
"At present, I believe the risks are tilted toward higher inflation," Cook stated in prepared remarks for an address to the Economic Club of Miami. This comes one week after she joined the majority of Fed governors in a 10-2 vote to maintain the policy rate at its current level.
The Fed reduced short-term borrowing costs three times last year, with the current target range for the federal funds rate standing at 3.50% to 3.75%.
Cook noted that these previous rate cuts will continue to support the currently stable labor market. She pointed out that the U.S. unemployment rate was 4.4% in December, significantly lower than the 50-year average of 6.2% seen before the COVID-19 pandemic began in 2020.
However, she emphasized that no progress has been made toward the Fed's 2% inflation goal. She highlighted that inflation, when excluding the volatile food and energy categories, was running at approximately 3% near the end of last year.
"After the significant disinflation seen in prior years, the current stagnation is frustrating," she remarked.
While she expressed optimism that the impact of tariffs on goods prices will fade, allowing inflation to decline again this year, she cautioned that the path forward holds "significant uncertainty." This includes questions about future tariff policies and whether inflation expectations might become entrenched.
"Having experienced inflation above our target for nearly five years, we must maintain credibility, return to a disinflationary path, and achieve our goal within a relatively short timeframe," Cook stated. "Unless I see more compelling evidence that inflation is sustainably returning to our target, my focus will remain on this objective, regardless of unexpected developments in the labor market."
Since taking office in 2002, Cook has voted in alignment with Fed Chair Jerome Powell and the majority of the central bank's policymakers on every interest rate decision.
The U.S. President has consistently urged the Fed to accelerate the pace of rate cuts, a move the central bank has so far resisted. Last year, former President Trump sought to remove Cook from her position, citing alleged misrepresentations on a mortgage application. Cook has filed a lawsuit challenging this action, and the case is currently under review by the U.S. Supreme Court.
Trump has nominated former Fed Governor Kevin Warsh to succeed Powell when his term concludes in mid-May, partly due to Warsh's support for the interest rate cuts that Trump has advocated for.
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