Washington (United States) (AFP) – A key US central bank official expressed her readiness Wednesday to take action against inflation if price increases remain stubborn. “If we do not see signs of disinflation soon, I am prepared to act,” Federal Reserve governor Lisa Cook told an event in Washington. “I am fully committed to reaching our inflation target, and this commitment is unwavering,” she added.
The Fed has a dual mandate of maintaining price stability and maximum employment, and generally keeps interest rates higher to curb inflation, or lower to boost the jobs market. Cook’s comments flagged greater concern over inflation than employment currently, implying that she could support a rate hike down the line. But she stressed Wednesday that “at this juncture, I see it as prudent to give a bit more time to observe how inflation unfolds from here.”
Cook said the Fed’s rate-setting committee “can take its time” to observe data while deciding on interest rate adjustments. “Going forward, though, I believe the risks continue to be strongly weighted toward higher inflation,” she warned. This is because the artificial intelligence buildout “does not show signs of slowing,” she said. President Donald Trump’s tariffs and conflict in the Middle East also “risk leading to persistently higher inflation,” she added. Cook estimates that headline inflation this year will be about one percentage point higher than what was anticipated a year ago.
US inflation has already been above the Fed’s two percent target for around five years, fueling concerns. In a separate speech on Wednesday, however, New York Fed President John Williams said: “There are encouraging reasons to expect that inflation has peaked and should edge down in coming quarters.” Official data released this week showed consumer inflation at 3.5 percent in June, cooling from May’s reading on lower energy prices amid hopes of a US-Iran deal.
But hostilities have since resumed in the Middle East, sending oil prices higher. This could keep inflation persistent. The Fed’s rate-setting committee is due to meet next between July 28 and 29.
© 2024 AFP
