Fed’s Cook warns inflation risks remain tilted higher

Fed Governor Cook signalled a clear bias against near-term rate cuts, saying inflation risks remain skewed to the upside despite a stabilised labour market.

Summary:

• Fed Governor Cook says inflation risks remain skewed to the upside

• Signals no support for near-term rate cuts without clearer disinflation

• Labour market seen as stable and broadly balanced

• Tariff-driven price pressures remain a key uncertainty

• Comments reinforce Fed’s cautious, credibility-first stance

Federal Reserve Governor Lisa Cook pushed back against expectations for further interest-rate cuts on Wednesday, signalling that concerns over inflation outweigh risks from a cooling labour market.

Speaking in prepared remarks, Cook said inflation progress has stalled stubbornly above the central bank’s 2% target, leaving risks tilted toward higher inflation rather than weaker growth. Her comments underscore a firm reluctance to ease policy again until there is clearer evidence that price pressures are moving sustainably back toward target.

Cook acknowledged that last year’s rate cuts are continuing to support the labour market, which she described as stabilised and roughly in balance. Unemployment remains low by historical standards, and weak consumer sentiment does not, in her view, signal the kind of slack that could be addressed through lower policy rates.

Inflation, however, remains the central concern. Cook said progress toward disinflation has plateaued after earlier gains, with core inflation running around 3% late last year. While she expressed optimism that tariff-related price pressures may fade over time, she stressed that there is considerable uncertainty around that outlook, including future trade policy and the risk that inflation expectations could become entrenched.

Cook also flagged structural risks linked to artificial intelligence investment, warning of a possible timing mismatch between rising costs today and productivity gains that may take longer to materialise. She added that while the US economy remains solid, there are signs of a deteriorating outlook for low- and moderate-income households that warrant close monitoring.

Cook voted last week with the majority of policymakers to keep rates unchanged, reinforcing a cautious stance centred on restoring inflation to target and preserving the Fed’s credibility.