Fed Governor Cook Warns Inflation Risks May Outweigh Job Market Concerns

Federal Reserve Governor Lisa Cook has signaled her willingness to raise interest rates if inflation doesn't start easing in the US economy. In a speech delivered in Anchorage, Alaska, she stated that she's prepared to act by raising rates 'if necessary' to deal with 'too high' levels of inflation.

Cook noted that the risks to the inflation side of the Fed's mandate are higher than the risks to its job market goal. If the Fed needed to raise rates to tackle strong price pressures, Cook would weigh how that potential action would affect the overall economy, saying 'I would support an increase, if it becomes necessary, to bring inflation down.' However, she also cautioned that 'it may not' be sufficient.

The Fed's Governor emphasized that the central bank is running out of space to deal with inflation given how long it has overshot the 2 percent target. As measured by the personal consumption expenditures price index, inflation in June stood at 3.7 percent compared to the same month a year before.

Cook also highlighted the risks of inflation becoming entrenched in price- and wage-setting behavior, which would be harder for the Fed to address. She noted that while they might afford to wait longer in other environments, 'we do not have that luxury' in this one.