MNI: Cook Says Fed's Path To 2% Inflation Could Be Long

Federal Reserve Governor Lisa Cook said Friday she's weighing the implications of recent bank turmoil against continued strength in the economy and recent evidence that suggest slower disinflation and a longer path to the Fed's 2% inflation goal.

"Currently, with the federal funds rate target near 5%, I am looking at what rate will be sufficiently restrictive to bring inflation down to 2%, over time," she said in prepared remarks, adding she expects next week's PCE inflation reading to be somewhat above 4%.

"Much of the decline so far has been driven by the moderation in energy prices, and there is evidence that the path back to our low and stable inflation goal could be long and is likely to be uneven and bumpy."

"If data show continued strength in the economy and slower disinflation, we may have more work to do," she said.

On the other hand, if tighter financing conditions are a "significant headwind" on the economy, "the appropriate path of the federal funds rate may be lower than it would be in their absence," she said at Georgetown University.

There are some signs that this strong labor market is softening at the margin, Cook noted.

"Wage growth has moderated somewhat from the rates reached about a year ago," she said, noting the quits rate has retraced more than half of its pandemic-era rise. (See: MNI INTERVIEW: Atlanta Fed Wage Tracker Shows Deceleration)