Fed Governor Cook: Supply Shocks Have Persistent Effects

Federal Reserve Board Governor Lisa Cook has noted that supply shocks have had surprisingly persistent effects in recent years. Speaking at the NY Fed's Central Banking Seminar, she emphasized the importance of considering these shocks when setting monetary policy.

Cook pointed out that the traditional view was to 'look through' supply shocks, assuming that tighter monetary policy would not affect oil prices or the impact of a war. However, she noted that this perspective is no longer valid as supply shocks are becoming increasingly salient.

Cook also highlighted the statistical regularity between gasoline prices and consumer confidence, stating that 70% of GDP comes from consumer spending. She emphasized the need to keep inflation expectations anchored, citing the experiences of Central and South American economies that successfully managed difficult supply shocks without a crisis or breakdown.