By Jessica Coacci
Federal Reserve governor Lisa Cook said she is prepared to raise interest rates if disinflation does not appear in a timely manner.
For now, the right course of action is to hold rates steady, but risks still remain tilted toward higher inflation, Cook said at Stanford University on Wednesday.
"After five years of above-target inflation, I am particularly attuned to the risk that elevated inflation will become embedded in price- and wage-setting behavior," according to a published text of her remarks.
With regard to the labor market, Cook said she expects things to remain stable without the need to lower interest rates, but would be prepared to adjust her policy stance downward, should the job market deteriorate.
Cook said that while inflation has been pushed up by supply-driven shocks, such as the war with Iran, even temporary and short-lived shocks could influence inflation in the medium term. In addition, she said yet another shock to prices could be layered on from heightened investment demand due to artificial intelligence.
Cook is optimistic about the promise for AI to boost productivity, which in turn will support new jobs and put downward pressure on inflation.
"AI-related job loss could precede job gains," she said. "Although we do not have conclusive evidence of this occurring yet, it may still be on the horizon, and increased churn in the labor market could be anticipated."
Write to Jessica Coacci at jessica.coacci@wsj.com
(END) Dow Jones Newswires
May 27, 2026 15:55 ET (19:55 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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