MNI: Fed Gov Cook: Can Be More Cautious On Further Cuts
MNI (WASHINGTON) - The Federal Reserve can move more gradually on lowering interest rates this year as inflation looks stickier and the labor market has stayed strong, Fed Governor Lisa Cook said Monday.
"Since September, the labor market has been somewhat more resilient, while inflation has been stickier than I assumed at that time. Thus, I think we can afford to proceed more cautiously with further cuts," she said in remarks prepared for a University of Michigan Law School conference in Ann Arbor, Mich.
The 100 basis points of rate cuts since September has made policy much more restrictive, she said. "All along, I envisioned moving more quickly in the early stages of our easing campaign and then easing more gradually as the policy rate came closer to neutral."
The FOMC estimates the neutral rate to be between 2.4% and 3.9%. The current overnight rate target is 4.25%-4.5%.
Cook continues to expect inflation to return to 2% this year, but the road might be gradual and uneven, she said.
Supply side boosts from labor force participation and an increase in immigration, as well as productivity have allowed the U.S. economy to grow quickly in recent years. That's unlikely to persist, but a surge in new businesses and the high rate of investment in AI are reasons to believe productivity growth will stay strong, she said. (MNI INTERVIEW: Fed Won't Consider Cuts Until March - Benigno)