MNI: Cook Says Prudent For Fed To Move In Smaller Steps
Fed Governor Lisa Cook says there is good news emerging on services prices.
Federal Reserve Governor Lisa Cook said Wednesday it would be prudent for the central bank to start moving in smaller steps, given the monetary tightening already in the pipeline and that policy works with long lags.
While "inflation remains much too high" and the Fed must continue to focus on bringing inflation back down to the 2% target, Cook says: "We have begun to see some improvement in the inflation data."
"How far we go, and how long we keep rates restrictive, will depend on observed progress in bringing down inflation," she said.
Core goods inflation has finally begun to slow "significantly," helped by improvement in global supply chains, she said, while services inflation remains high. "Nonetheless, some good news is emerging on this front. Rent increases on new leases have slowed in recent months," she said.
"Still, these positive developments are likely to feed into measured consumer prices only gradually." (See: MNI INTERVIEW:US Inflation Likely At Turning Point-SF Fed Econ)
Since March, the FOMC has raised its policy rate nearly 4 percentage points. "That tightening is clearly slowing demand in sectors that are interest sensitive, especially housing, with residential investment contracting sharply," she said in prepared remarks for a speech at the Detroit Economic Club focusing on U.S. productivity.
Consumer spending has remained resilient, supported by labor income growth and still elevated savings, she said, also pointing to labor market tightness as a reason to continue hiking rates.
"Labor compensation is a key factor for non-housing services prices, and growth in labor costs remains well above pre-pandemic rates," she said. While there has been some moderation recently, "wage growth remains above what would be consistent with 2 percent inflation, given prevailing trends in productivity growth."