By Howard Schneider
WASHINGTON, July 15 (Reuters) – U.S. Federal Reserve Governor Lisa Cook said on Wednesday she is “prepared to act” if inflation does not soon begin to slow, though she is willing to wait “a bit more time” for that to happen.
“I see it as prudent to give a bit more time to observe how inflation unfolds from here. Going forward, though, I believe the risks continue to be strongly weighted toward higher inflation,” because of the investment boom around artificial intelligence and price pressures from tariffs and the war in the Middle East, Cook said in remarks prepared for delivery to the Exchequer Club of Washington, D.C.
“If we do not see signs of disinflation soon, I am prepared to act,” Cook said. “I am fully committed to reaching our inflation target, and this commitment is unwavering.”
Cook compared the current situation, marked by inflation well above the Fed’s 2% target and a seemingly stable job market, with the outlook a year ago when there were risks to the job market and inflation had been slowing.
“I see a notable shift in the balance of risks relative to a year or so ago, with inflation risks now outweighing employment risks,” she said.
Fed officials have been debating the prospect of a rate hike that investors anticipate could come as soon as this fall, with Fed Governor Christopher Waller also this week saying the U.S. central bank may need to act unless there is consistent evidence of slower inflation in coming months.
The outlook for rates became cloudier this week after the U.S. government released two generally benign inflation reports.
Fed Chairman Kevin Warsh has avoided commenting on his interest rate views, even as the outlook among his colleagues has been shifting toward the need for tighter monetary policy.
The central bank’s policy-setting Federal Open Market Committee will hold its next meeting on July 28-29.
Cook said on Wednesday she considered the Fed’s current 3.50%-3.75% policy rate “mildly restrictive,” meaning it could serve to bring inflation down.
“The FOMC can take its time, I can take my time, to observe more data to understand whether it’s really restrictive or not,” Cook said.
(Reporting by Howard Schneider; Editing by Paul Simao)
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