Federal Reserve Governor Lisa Cook stated she is prepared to raise interest rates if inflation does not cool, citing risks to price stability. Minneapolis Fed President Neel Kashkari reiterated his call for gradual rate hikes and clear communication of the Fed's reaction function.
The comments from Fed officials signal a continued hawkish bias, indicating a willingness to raise interest rates further if inflation remains stubbornly above the central bank's target, potentially impacting borrowing costs and economic growth.
Federal Reserve Governor Lisa Cook indicated she is prepared to raise interest rates if inflation does not begin to ease, stating that the risks to price stability are currently higher than those to the job market. Cook noted that the central bank has limited room to address persistent inflation that has overshot the 2% target.
Cook, who voted to keep rates unchanged at the last Federal Open Market Committee meeting, expressed commitment to restoring price stability. She suggested that factors contributing to inflation, such as tariffs, the Middle East conflict, and investments in artificial intelligence, might eventually subside. However, she cautioned that inflation could become entrenched in price and wage-setting behaviors, making it harder to combat.
Meanwhile, Minneapolis Fed President Neel Kashkari reiterated his view that communicating the Fed's 'reaction function' is beneficial for market understanding and advocated for continued small rate hikes to curb inflation. He observed a divergence between weakening labor market signals and exuberant financial markets.
San Francisco Fed President Mary Daly stated she was supportive of the decision to hold interest rates steady at the July policy meeting, emphasizing the need to gather more data before the September meeting to assess inflation trends.