Fed’s Cook: Could see a pause on rate moves if inflation progress slows

Federal Reserve (Fed) Board of Governors member Lisa Cook noted on Wednesday that while she views the overall economic outlook within the US as fairly balanced, the Fed might get forced into a pause on rate cuts if inflation progress slows down while employment remains solid.

Key highlights

If the labor market and inflation evolve as expected, it would be appropriate to continue lowering the policy rate towards neutral.

Elevated core inflation suggests the fed still has further to go.

The economy is in a good position, though core inflation is still somewhat elevated.

Risks right now are roughly in balance.

The magnitude and timing of rate cuts will depend on coming data, the outlook, and the balance of risks. Policy is not preset.

Cuts so far were a strong step toward removing policy restriction.

The totality of data suggests disinflation is still underway with the labor market gradually cooling.

If inflation progress slows with the job market still solid, could see a scenario for pausing.

Economic growth is robust, I expect expansion will continue.

Housing services account for most of the excess of core inflation.

Faster productivity growth appears to have supported both potential and actual growth.

Continued growth with slowing inflation could mean the underlying potential is greater than thought.

The labor market largely normalized, and is no longer a source of inflation.

The job market overall remains solid, recent weak growth a result of the temporary strike and storm effects.

Slowing wage growth increases confidence in continued disinflation.