Federal Reserve Governor Lisa Cook indicated on Wednesday that inflation in the United States is moving in the wrong direction, suggesting that the Fed may need to raise interest rates further if price pressures fail to ease in the coming months. Speaking at an event at Stanford University, Cook stated that she currently supports maintaining interest rates at their current level and anticipates a slowdown in inflation over the next few months. However, she emphasized that the primary risk facing the U.S. economy remains "higher inflation." Cook remarked, "I want to be clear about my risk assessment: the risks are still tilted toward higher inflation." She warned that inflation has consistently exceeded the Fed's 2% target over the past five years, which could lead to high inflation becoming embedded in business pricing and wage-setting behaviors. Cook added, "Therefore, if the anticipated disinflation does not materialize in a timely manner, I am prepared to support a rate increase." Analysts note that Cook's remarks signal a growing number of Fed officials are beginning to view inflation as the most significant policy risk currently, rather than a slowdown in the labor market. Recent tensions between the U.S. and Iran have continued to impact global energy markets, further heightening concerns about reflation 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 Fed meeting minutes, most officials indicated at last month's meeting that if inflation remains persistently above target levels, the Fed may need to reconsider raising interest rates. At that meeting, the Fed kept the benchmark interest rate range unchanged 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 investments, valued at up to $1.5 trillion, could drive up prices for chips and high-tech equipment, creating a new round of price shocks. 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 Fed is currently leveraging 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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