Lisa Cook: Fed Inflation Credibility "Dead Weight"
Federal Reserve Governor Lisa Cook emphasized that the central bank must maintain its credibility by ensuring inflation returns to its 2% target in the near term. In remarks prepared for an event in Miami on Wednesday, Cook said her primary focus remains on inflation until there is stronger evidence that the pace of price increases is truly declining sustainably—provided there are no major shocks in the labor market.
The statement came after the Fed held its benchmark interest rate last week in the 3.50%–3.75% range, following three consecutive rate cuts through the end of 2025. By holding rates, officials signaled that the economy and job market remain strong enough that there is no "urgent" need for further cuts in the near term.
Cook also highlighted that the risks are now tilted toward higher inflation. She echoed several other Fed officials who have begun to sound more cautious, given that inflation has persisted above the 2% target for several years. According to Cook, after nearly five years of inflation exceeding the target, efforts to return inflation to a disinflationary path are not just an agenda—they are the foundation of public confidence in monetary policy.
This issue is increasingly sensitive because it is closely linked to political dynamics: US President Donald Trump announced plans to nominate Kevin Warsh as the next Fed chairman. Trump has long pushed for aggressive interest rate cuts, leading some market participants to worry that the next leadership could shift the Fed's priority from "fighting inflation" to "promoting growth" more quickly.
Warsh himself believes the Fed has room to lower interest rates, arguing that increased productivity—including from technology—can boost economic growth without triggering inflation. However, Cook emphasized that without certainty that inflation is truly under control, easing too quickly could actually compromise the Fed's already hard-won credibility.
Regarding the labor market, Cook believes the lack of dynamism could make employment vulnerable to downward shocks. However, he described the current job market as still "more or less balanced." The unemployment rate, which fell slightly in December, is also said to be showing signs of stabilization.
Concluding his statement, Cook acknowledged that uncertainty about the economic outlook remains high. However, he believes the labor market will continue to benefit from the impact of three interest rate cuts last year—although the direction of future policy will remain highly dependent on inflation data and future economic resilience. (alg)
Source: Newsmaker.id
