Federal Reserve Governor Lisa Cook stated Wednesday that she is prepared to raise interest rates if inflation does not show signs of cooling, aligning with an increasing number of officials who indicate a willingness to tighten monetary policy. Cook, speaking at an economic luncheon in Anchorage, Alaska, said she would support an increase if necessary to combat inflation that she described as "too high."
Cook argued that the risks to the Federal Reserve's price stability mandate outweigh the risks to its full employment goal, given the current inflationary environment. She noted that inflation has been above the Fed's 2% target for over five years, easing only slightly to 3.5% in June. The governor expressed concern that inflation could become entrenched in price and wage-setting behaviors, making it more difficult to address.
"While we might be able to afford to wait for longer in a different environment, we do not have that luxury in this one," Cook said, suggesting a limited window for action.
At the Federal Reserve's most recent meeting, Cook was among nine officials who voted to maintain interest rates within the 3.5% to 3.75% range. However, three officials dissented, preferring to raise rates, indicating growing internal disagreement on the appropriate pace of action against inflation. Other officials, including Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack, and Minneapolis Fed President Neel Kashkari, had advocated for a quarter-point rate hike. New York Fed President John Williams and Philadelphia Fed President Anna Paulson have also signaled openness to raising rates.
Cook explained her vote to hold rates by stating, "I felt it was appropriate not to change rates while we see how" inflation unfolds, citing uncertain factors such as tariffs, Middle East conflict, and significant spending on artificial intelligence. Nevertheless, she reiterated, "I am firmly committed to restoring price stability."
Fed Chair Jerome Powell, in office for less than three months, has repeatedly stressed the committee's commitment to lowering prices but has not specified when he would be prepared to raise rates. Inflation saw a slight decrease in June due to falling energy prices, but oil prices have since experienced volatility amid reports on negotiations with Iran. The central debate among officials revolves around whether a single positive inflation report is sufficient to alleviate concerns and whether raising rates too soon could impede economic growth. Conversely, there is a concern that delaying rate hikes could allow inflation to escalate further.
In a separate matter, Governor Cook has denied allegations of wrongdoing related to a past attempt by former President Trump to remove her from her position. The Supreme Court blocked this attempt in June, ruling that such dismissals could politicize policy decisions. Fed Chair Powell and former Fed Chair Ben Bernanke had attended oral arguments in that case to show support for Cook.