MNI: Fed’s Cook-Easing Appropriate With Disinflation On Track
MNI (WASHINGTON) - U.S. inflation is gradually coming down to the Federal Reserve’s 2% target in a way that should allow policymakers to keep cutting interest rates, although the pace and timing of further easing are not yet determined, Fed Governor Lisa Cook said Wednesday.
“The totality of the data suggests that a disinflationary trajectory is still in place and that the labor market is gradually cooling,” Cook said in prepared remarks. “It likely will be appropriate to move the policy rate toward a more neutral stance over time.”
“Despite this significant progress on disinflation, the elevated core figure suggests that we have further to go before credibly achieving our inflation target,” she said. “Although most price indicators suggest that progress is ongoing, I anticipate bumps along the road.”
Most of that lingering strength is due to housing costs that Cook expects will moderate over the next couple of years.
PRODUCTIVITY GAINS
Surprising economic strength even as inflation continues to fall is likely due to a rise in productivity that had boosted the country’s growth potential, Cook said.
“I still see the direction of the appropriate policy rate path to be downward, but the magnitude and timing of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” she said.
Cook said the labor market remains solid but job growth may not be strong enough to keep the unemployment rate at the current low rate of 4.1%.
“I see employment risks as weighted to the downside, but those risks appear to have diminished somewhat in recent months.”