Gov Cook Eyes "Cautious" Approach On "Bumpy" Road To 2% Inflation

Fed Governor Cook's "main message" at a speech Monday on "The Dual Mandate and the Balance of Risks"" is taken largely verbatim from Chair Powell's post-meeting press conference prepared statement last week, though she espouses a "cautious" approach (a word not used by Powell last week, who instead used "careful", echoing the policy statement). She says:

• "the risks to achieving our employment and inflation goals are moving into better balance. Nonetheless, fully restoring price stability may take a cautious approach to easing monetary policy over time."
• While there is not much new or market-moving here, in the context of Powell's commentary last week that "an unexpected weakening in the labor market could also warrant a policy response" [ie a cut], Cook's speech provides a more context on the balance of risks as the FOMC seeks to meet its dual inflation/unemployment mandate. In an interview with ex-Fed Board research director David Wilcox, Powell's "unexpected weakening" comment is less indicative of the Fed's knowing something we don't know and more a statement on equally balanced risks - see MNI INTERVIEW: Fed Highlights Risk of Weakening Job Market, Mar 25.
• Cook touches on some subjects that didn't come up at last week's meeting, including the impact of lags that requires monetary policy to be "forward-looking", and the importance of the recent surge productivity growth in potentially non-inflationary wage growth possible.
• Her conclusion is probably reflective of the FOMC median for 3 cuts this year, and Cook is likely one of the 9 (of 19) Dots looking for that outcome in the March SEP. She notes that the disinflationary path is "bumpy" (a word used a few times by Powell) and "uneven", but a "careful" approach weighing "balanced" risks is called for:
  • "The risk of easing monetary policy too much or too soon is that it could allow above-target inflation to become entrenched and halt the progress that we have seen...but easing too late could also do unnecessary harm by holding back the economy and depriving people of economic opportunities."