The Fed’s Lisa Cook noted that she expects the Fed’s progress on inflation to continue despite a bumpy start to the year. Federal Reserve Governor Cook was addressing the Economic Club of New York on Tuesday.
the main points
At some point it will be appropriate to lower interest rates.
Current policy is well placed to respond to economic expectations.
Higher inflation expectations imply keeping monetary policy tight for longer.
I’m very interested in inflation expectations.
The timing of any policy adjustment will depend on economic data and its implications for expectations and the balance of risks.
Monetary policy is constrained.
Inflation has slowed, and labor market tightness has eased.
I am fully committed to the 2% inflation target.
Policy will also need to respond to sharper-than-expected weakness in the economy and labor market.
The job market is tight but not overheated.
The risks that threaten the achievement of inflation and employment goals have moved towards a better balance.
I see 12-month inflation moving sideways for the rest of this year, then slowing more sharply next year.
I expect inflation rates to decline within 3 and 6 months on a bumpy path.
Progress on inflation has slowed, but I expect the disinflation trend to continue.
I lean toward optimism about innovation and productivity, allowing for a faster pace of non-inflationary growth.
The rise in delinquencies on credit cards and auto loans is not yet cause for concern, but needs to be monitored.
I expect economic growth to remain close to the potential growth rate, i.e. somewhat above 2%.
The monthly job gains needed to keep the unemployment rate stable have likely doubled to nearly 200,000.
The financial system is not currently in a position to extraordinarily amplify any future shock.
More from Fed Cook:
There are challenges in measuring housing inflation.
It is defensible to include the equivalent rent for owners in the CPI.
There has been a long-standing housing shortage
The Federal Reserve is monitoring the unemployment rate, but it remains at a low level.
The Fed has the tools to adjust if there is an unexpected shift in unemployment.
There is ample evidence that monetary policy is constrained.
It will be difficult to push productivity beyond the long-term average.