Federal Reserve Governor Lisa Cook has expressed her readiness to raise interest rates if inflation does not ease, highlighting concerns over rising prices driven by tariffs, oil prices, and increased demand in the AI sector. Speaking at Stanford's Institute for Economic Policy Research, Cook emphasized the need for a balanced approach to the Fed's dual mandate.
Cook noted that inflation is "clearly moving in the wrong direction," influenced by last year's tariffs and the surge in oil prices since the Iran war began on February 28. Additionally, the growing demand for chips, software, and construction workers in AI data centers is contributing to upward pressure on prices.
Despite these concerns, Cook remains optimistic that inflation will ease in the coming months without the need for immediate rate hikes. However, she warned that persistent inflation above the Fed's 2% target over the past five years could lead to entrenched price and wage-setting behaviors.
“I see elevated risks to both sides of our mandate, and from a risk-management perspective, I currently believe that the right course of action is to hold rates steady.”
Lisa Cook, Federal Reserve Governor
Cook's stance presents a potential challenge for new Fed Chair Kevin Warsh, who was appointed by President Donald Trump with the expectation of lowering interest rates once the Iran war concludes and energy prices stabilize. Other Fed policymakers have also indicated that a rate hike might be necessary.
While Cook is optimistic about AI's potential to boost economic growth and productivity, she acknowledges the risk of job losses before gains materialize. Nevertheless, she believes the labor market will remain stable, with the unemployment rate at 4.3% in April.
“I want to be clear about my risk assessment: The risks remain tilted toward higher inflation.”
Lisa Cook, Federal Reserve Governor
Background
Cook's openness to a rate hike comes amid a backdrop of ongoing geopolitical tensions and economic uncertainties. Her comments underscore the Fed's cautious approach to balancing inflation control with economic growth.
Looking ahead, market participants will closely monitor the Fed's policy decisions and inflation trends. Cook's remarks suggest that while the Fed is prepared to act if necessary, it remains committed to supporting economic stability and growth.
