Federal Reserve Governor Lisa Cook stated that she is prepared to increase interest rates if inflation does not decline in a timely manner.
Speaking at Stanford University on Wednesday, Cook indicated that the appropriate course of action at present is to maintain stable interest rates, but risks remain skewed toward higher inflation.
According to a published copy of her prepared remarks, she said, "With inflation having been above target for five years, I am particularly focused on the risk that high inflation becomes embedded in price and wage-setting behavior."
Regarding the labor market, Cook noted that she expects the job market to remain stable without the need for rate cuts, but she is also prepared to adjust the policy stance downward if the employment situation deteriorates.
Cook mentioned that while inflation has been driven by supply-side shocks, such as conflicts involving Iran, even temporary and short-lived shocks could impact medium-term inflation. Additionally, she pointed out that increased investment demand driven by artificial intelligence (AI) could present another shock to prices.
Cook expressed optimism about AI's potential to boost productivity, which in turn would support the creation of new jobs and exert downward pressure on inflation.
She said, "AI-related job losses may occur before job growth materializes. While we do not yet have conclusive evidence that this is happening, it may be on the horizon, and increased turbulence in the labor market can be anticipated."
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