MNI: Cook Says Soft Landing Is Possible, Fed Not Done Hiking

Federal Reserve Governor Lisa Cook said Wednesday a soft landing in which inflation comes down and unemployment stays low remains possible, but the central bank is not done raising rates.

"I believe this can be accomplished, both sides of the dual mandate, without a large increase in unemployment," she said. The "labor market is historically strong by many measures, such as job openings, claims for unemployment insurance and what we call job quits."

But "inflation is still elevated. Yes, it has moderated and we consider that a very positive development but still it is running too high." (See: MNI INTERVIEW: Inflation Drop Looks Sustainable-Fed’s Wright)

"Going forward, as we further tighten monetary policy, it is appropriate to move in smaller steps while we assess the effects of our cumulative tightening in the economy and inflation," she said. "We are not done yet with raising interest rates, and we will need to keep interest rates sufficiently restrictive to bring inflation back to our target over time."

UNEVEN PROGRESS

"We have to be attentive to the cumulative effects of our tightening and the tightening that is already in process on the economy and inflation," she said at an event with the Joint Center for Political and Economic Studies, a black think tank

Cook said January's blowout employment report was surprising but stressed "not to put too much weight on one data point" and noted that labor force participation has not recovered to pre-pandemic levels. Cook anticipates GDP growth will be below trend this year.

"The path of our policy rates will depend on how quickly we see inflation across the entire economy moving towards a 2% goal," Cook said, characterizing her approach to monetary policy as data-dependent. "I think we will continue to see inflation falling this year and next, although there may continue to be uneven progress across sectors of the economy."