In a recent address at the Council on Foreign Relations, Federal Reserve Governor Lisa D. Cook offered a cautious assessment of the U.S. economy and its monetary policy trajectory. While she acknowledged that economic fundamentals remain strong, she noted growing uncertainty since the beginning of the year.
Cook pointed to persistently low unemployment and inflation still above the Federal Open Market Committee’s 2% target. She warned that evolving trade policies are starting to influence economic conditions, potentially driving up inflation and dampening labor market strength.
Although inflation has eased from its pandemic-era highs, it remains elevated. Consumer prices rose 2.1% year-over-year in April, or 2.5% when excluding food and energy. Trade-related price increases, Cook noted, could hinder further progress in curbing inflation.
The labor market remains robust, with April’s unemployment rate holding at a low 4.2%. However, Cook cautioned that ongoing trade policy shifts might soon impact hiring and productivity levels.
Economic output, meanwhile, has slowed in early 2025, following strong growth last year. First-quarter GDP growth declined, and April saw a drop in manufacturing activity. Businesses have also scaled back capital investment plans for next year, reflecting uncertainty around tariffs.
Despite stable economic conditions, Cook warned that challenges for policymakers could intensify. At the latest FOMC meeting, she supported keeping interest rates steady, arguing that current policy settings allow flexibility amid evolving risks.
She also stressed the importance of learning from international experiences in the post-pandemic recovery, highlighting the potential for inflation to shift abruptly in a globally interconnected economy. Maintaining inflation credibility, she said, is key to anchoring long-term expectations.
In closing, Cook reaffirmed her view that the economy remains resilient but cautioned that elevated uncertainty could threaten both price stability and employment. She underscored the need for vigilance in guiding future policy decisions.
