Fed Governor Lisa Cook signals action

Federal Reserve Governor Lisa Cook said on August 5 that she is prepared to support a rate increase if inflation does not keep easing, hardening the message from a central bank that held rates steady only a week earlier. In remarks prepared for an Anchorage, Alaska speech, Cook said inflation remained “too high” and that risks to price stability outweighed risks to employment at this point. Her comments came after the Federal Open Market Committee voted 9-3 on July 29 to leave the benchmark federal funds rate unchanged at 3.5% to 3.75%. ### What exactly did Cook say in Anchorage? Lisa Cook said in prepared remarks released by the Federal Reserve on August 5 that “inflation is too high” and that she viewed inflation risks as higher than employment risks. She added: “As such, I am prepared to act by raising rates, if necessary.” Cook also said she would not put too much weight on a single month of better inflation data in what she called a “highly uncertain environment.” The personal consumption expenditures price index rose 3.7% in the 12 months through June, while core prices rose 3.3%, according to her speech. (federalreserve.gov) ### Why did she vote to hold rates last week if she is talking about hiking now? (federalreserve.gov) The Federal Open Market Committee said on July 29 that it voted 9-3 to keep the target range for the federal funds rate at 3.5% to 3.75%. The statement said inflation remained elevated relative to the Fed’s 2% goal. Cook told CNBC that she supported holding rates at that meeting because she wanted more time to assess several forces pushing on prices, including tariffs, an energy supply shock tied to the Iran war and spending linked to the artificial-intelligence buildout. (federalreserve.gov) She said that unless she sees signs of continued disinflation soon, she is prepared to act. (federalreserve.gov) ### Who dissented, and what does that say about the committee? The July 29 FOMC statement named Beth M. Hammack, Neel Kashkari and Lorie K. Logan as the three officials who preferred to raise the target range by a quarter percentage point at that meeting. That split made the hold decision less unanimous than recent Fed decisions. (cnbc.com) Neel Kashkari reinforced that divide on August 5, telling CNBC that “now is the time to start slowly moving up” rates. CNBC reported that Kashkari said a gradual approach could start in September, though he did not commit to a timetable. ### What are markets watching now? CNBC reported that markets see a possible move as soon as September, while pricing higher odds for October, citing CME Group’s FedWatch tool. (federalreserve.gov) The same report said Cook’s remarks came as investors weighed whether the central bank would need to respond to persistent price pressures. (cnbc.com) Longer-dated Treasury yields have also stayed elevated as investors reassess the policy path. A market commentary published August 3 said the 10-year Treasury yield finished the prior week near 4.74%, its highest level since January 2025, as investors repriced the odds of additional tightening. (cnbc.com) ### What price pressures did Cook single out? Cook said two unexpected sources of price pressure this year were the Middle East conflict, which pushed up energy and other goods costs, and rising capital spending to build artificial-intelligence infrastructure. She said elevated energy prices had contributed significantly to inflation over the past year, but were not the only factor. (pennmutualam.com) Cook also warned that five years of above-target inflation raised the risk that faster price growth could become embedded in wage-setting and price-setting behavior. CNBC quoted her as saying, “We do not have that luxury in this one,” referring to the option of waiting longer before acting. (federalreserve.gov) ### When is the next test for this stance? The next scheduled FOMC meeting is September 15-16, according to market rate-monitor tools and Fed-linked calendars that track upcoming policy decisions. Investors will also be watching incoming inflation data for signs of whether the June easing Cook cited continues. (investing.com) (cnbc.com)