Federal Reserve Governor Lisa Cook indicated on Wednesday that U.S. inflation is moving in the wrong direction. She stated that if price pressures do not subside again in the coming months, the central bank may need to consider raising interest rates further.
Speaking at an event at Stanford University, Cook said she currently supports maintaining the current interest rate level and anticipates a renewed slowdown in inflation over the next few months. However, she emphasized that the primary risk facing the U.S. economy remains "higher inflation." "I want to be clear about my risk assessment: the risks are still tilted toward higher inflation," she stated.
Cook warned that inflation has remained persistently above the Federal Reserve's 2% target for the past five years. This could lead to high inflation becoming embedded in business pricing and wage-setting behaviors. "Therefore, if the expected decline in inflation does not materialize in a timely manner, I am prepared to support raising interest rates," she added.
Analysts noted that Cook's remarks suggest a growing number of officials within the Federal Reserve are beginning to view inflation as the most significant policy risk at present, rather than a slowdown in the labor market.
Recent conflicts between the U.S. and Iran have continued to impact global energy markets, further heightening market concerns about re-inflation risks.
Data shows that the U.S. Consumer Price Index (CPI) for April recorded its largest increase since 2023, with notable rises in gasoline, food, and rental prices.
According to previously released Federal Reserve meeting minutes, most officials indicated during last month's meeting that if inflation continues to exceed target levels, the Fed may need to reconsider raising interest rates.
During that meeting, the Federal Reserve maintained the benchmark interest rate range at 3.5% to 3.75%.
Beyond energy factors, Cook specifically highlighted the potential new inflation risks posed by the AI investment boom. She pointed out that the current wave of AI investment, valued at up to $1.5 trillion, could drive up prices for chips and high-tech equipment, creating a new round of price pressures.
However, Cook also noted that the U.S. job market remains generally stable, though downside risks to employment "have increased." Additionally, she revealed that the Federal Reserve is currently utilizing AI technology to enhance its analysis of the financial system and identify potential financial vulnerabilities, helping policymakers detect and respond to risks more swiftly.
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