Fed’s Cook Says Rate Hike Possible if Disinflation Fails to Materialize
Summary
- Lisa Cook said inflation risks remain elevated and the Fed is prepared for a rate hike if disinflation does not materialize in time.
- For now, she said it is appropriate to hold the U.S. benchmark interest rate steady, but the Fed may need to consider a rate hike if inflation pressures persist.
- She said higher energy prices after the U.S.-Iran war and roughly $1.5 trillion in AI investment could raise semiconductor and advanced equipment prices, creating a new source of inflation.
Forecast Trend Report by Period
Federal Reserve Governor Lisa Cook said additional interest-rate increases remain possible if inflation fails to cool.
Bloomberg reported on May 27 that Cook, speaking at a Stanford University event, said risks remain tilted toward higher inflation. If the disinflation policymakers expect does not materialize in time, the Fed is prepared to raise rates.
For now, however, Cook said holding the benchmark interest rate steady is appropriate. She added that inflation should resume moderating in the coming months.
Recent comments from Fed officials have underscored greater concern about inflation than labor-market weakness. Minutes from last month’s Federal Open Market Committee meeting also showed that many participants said policymakers may need to consider raising rates again if price pressures persist. The U.S. benchmark interest rate currently stands at 3.5% to 3.75%.
Bloomberg said inflation pressures have been building again as energy prices rise in the aftermath of the recent war between the U.S. and Iran. In April, the U.S. consumer price index recorded its biggest increase since 2023, driven by higher gasoline, rent and food prices.
Cook also said increased investment in artificial intelligence could become another source of inflation. She said the roughly $1.5 trillion AI investment boom could drive up prices for semiconductors and advanced equipment.
Cook said the labor market remains broadly stable, but added that the risk of slower employment growth is still high.
Suehyeon Lee
shlee@bloomingbit.ioI'm reporter Suehyeon Lee, your Web3 Moderator.
