By Ann Saphir
Feb 4 (Reuters) – Federal Reserve Governor Lisa Cook on Wednesday signaled that she will not support another interest-rate cut until she sees more proof that price pressures are receding, saying she is more concerned about stalled progress on inflation than a weakening labor market.
“At this time, I see risks as tilted toward higher inflation,” Cook told the Economic Club of Miami, a week after she joined the majority of her fellow U.S. central bankers in a 10-2 vote to leave the policy rate steady, after cutting interest rates at its prior three meetings.
“We put a lot of easing into the pipeline at the end of last year and I think that given where the labor market is, where inflation is, this is the right time to sit back and wait to see what happens,” she said. Monetary policy is currently “ever so mildly restrictive,” she said.
The Fed’s target for short-term borrowing costs is currently 3.50%-3.75%, and after last week’s decision Fed Chair Jerome Powell said the central bank is “well-positioned” to assess when or whether another rate cut will be needed.
Financial markets are currently pricing two more interest-rate cuts, both after Powell’s leadership term ends in May.
President Donald Trump, who has pressured the Fed to slash interest rates sooner and faster than it has, last week nominated former Fed governor Kevin Warsh to succeed Powell in part because Warsh supports the rate cuts that Trump wants.
COOK DID NOT COMMENT ON EFFORT TO OUST HER
Trump last year tried to oust Cook over alleged misstatements on her mortgage applications, an effort that she has sued to stop in a case currently before the Supreme Court.
Cook said she had received an “outpouring” of support from friends, colleagues and former colleagues in recent weeks, and said she would not comment on the case, which is widely viewed as a referendum on the president’s power to exert control over the Fed.
“I can say that it is an honor to serve on the Board of Governors of the Federal Reserve System,” she said. “I will continue to carry out my sworn duties in that role on behalf of the American people.”
Cook has voted with Powell and the majority of Fed policymakers on every interest-rate decision she has taken part in since she started the job in 2022, supporting rate hikes when the Fed was fighting rising inflation, and more recently rate cuts when the labor market appeared to be weakening.
The job market has now stabilized, she said, using the same term that Powell used last week. Unemployment, at 4.4% in December, is well below the 50-year average of 6.2% that preceded the 2020 COVID-19 pandemic, she noted.
But in remarks that sounded more hawkish than Powell, she said progress on inflation, which the Fed targets at 2%, has stalled. Estimates put inflation at about 3% at the end of last year, after stripping out volatile food and energy prices.
“Such a plateau is frustrating after seeing significant disinflation in the preceding few years,” she said.
And while she is optimistic that the effect of tariffs on goods prices will recede and allow inflation to come back down again this year, there is “much uncertainty” over that path, including future tariff policy and whether inflation expectations may become entrenched.
“After nearly five years of above-target inflation, it is essential that we maintain our credibility by returning to a disinflationary path and achieving our target in the relatively near future,” Cook said. “Until I see stronger evidence that inflation is moving sustainably back down to target, that is where my focus will be, in the absence of unexpected changes in the labor market.”
(Reporting by Ann Saphir; Editing by Deepa Babington)
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