(Nov 4): US Federal Reserve governor Lisa Cook said she sees the risk of further labour-market weakness as greater than the risk that inflation will pick up, but stopped short of endorsing another interest-rate cut next month.
“Looking ahead, policy is not on a predetermined path. We are at a moment when risks to both sides of the dual mandate are elevated,” Cook said Monday at a Brookings Institution event in Washington. “Every meeting, including December’s, is a live meeting.”
Her comments echoed earlier remarks on Monday from two of her colleagues who were equally non-committal about whether the central bank should deliver a third straight rate reduction when policymakers convene in December.
Fed officials cut their benchmark policy rate last week by a quarter percentage point. But Fed chair Jerome Powell emphasised that a cut in December isn’t guaranteed, given diverging viewpoints among policymakers about the outlook for inflation and the labour market.
Cook said she expects inflation to remain elevated for the next year, as the effects of US President Donald Trump’s tariffs pass through the economy.
“Nonetheless, the effect of tariffs on prices, in theory, should represent a one-time increase,” she said, adding that inflation should continue receding towards the Fed’s 2% target once tariff effects fade.
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Turning to the labour market, Cook said a rising unemployment rate indicates modest softening, though a recent slowdown in job growth “can mostly be explained by a coincident decline in population growth due to immigration policy”.
In a question-and-answer session following her prepared remarks, Cook said she had some concerns about the labour market, cautioning that conditions can quickly change.
“It can deteriorate very quickly. There can be non-linear effects. So I’m watching this very, very carefully,” she said.
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Still, last week’s decision to cut rates was appropriate “because I believe that the downside risks to employment are greater than the upside risks to inflation,” she said.
Earlier on Monday, San Francisco Fed president Mary Daly, at an event in West Palm Beach, said officials should “keep an open mind” about a December rate cut, as they sort through tradeoffs between their inflation and employment mandates. Chicago Fed president Austan Goolsbee, in a Yahoo Finance interview, said he’s more concerned about inflation now than the labour market, but added that he’s undecided about how the Fed should proceed in December.
Supreme Court case
Monday’s event marked Cook’s first public speech since Trump moved in August to fire her from the Fed’s Board of Governors over mortgage-fraud allegations, and her ensuing lawsuit to block the removal. The case has made its way to the Supreme Court, which will hear arguments in January. The justices rejected Trump’s request to immediately remove her while it proceeds.
The case is seen as a high-stakes test of the Fed’s independence from the White House. Trump has sought more influence over the Fed, and applied fierce pressure on the central bank this year to lower rates.
At the end of her prepared remarks, Cook said “questions related to this case and its potential impact on the US Federal Reserve have been addressed at length. Because the case is ongoing, it would be inappropriate for me to comment further today,” adding that she will continue to carry out her duties.
In the Q&A, Cook said she didn’t regret the amount of scrutiny she’s been subjected to as a public official. “I’ve been motivated to do public service given my family’s history, for example, in the civil rights movement.”
The independence of the Fed, she added, was a principle worth pursuing.
Uploaded by Liza Shireen Koshy
