Fed Governor Lisa Cook Says Disinflationary Trajectory Still In Place, Labor Market Gradually Cooling

Cook stated that if the labor market and inflation continue to progress in line with her forecast, it could be appropriate to lower the level of policy restriction over time

Stocktwits Inc

First Published Nov 21, 2024, 12:50 AM IST | Last Updated Nov 21, 2024, 12:50 AM IST

Federal Reserve Governor Lisa Cook said on Monday the totality of the data indicates a disinflationary trajectory is still in place and that the labor market is gradually cooling.

“I view the risks to achieving the Federal Reserve's dual mandate of maximum employment and price stability as being roughly in balance. Consistent with those balanced risks, in my view, it likely will be appropriate to move the policy rate toward a more neutral stance over time,” she said in her speech at the University of Virginia.

Cook stated that if the labor market and inflation continue to progress in line with her forecast, “it could well be appropriate to lower the level of policy restriction over time until we near the neutral rate of interest, or the point when monetary policy is neither stimulating nor restricting economic growth.”

The Fed Governor, however, noted that if inflation progress slows and the labor market remains solid, she sees a scenario where the central bank pauses along the downward path.

“Alternatively, should the labor market weaken in a substantial way, it could be appropriate to ease policy more quickly,” she said.

Notably, U.S. inflation witnessed an uptick in October but still remained in line with Wall Street estimates. According to the Bureau of Labor Statistics, the consumer price index (CPI) increased 0.2% on a seasonally adjusted basis in October, recording the same increase as in each of the previous three months.

The 12-month inflation rate rose 2.6%, 0.2 percentage points higher than September, partly due to the base effect, i.e. lower inflation a year ago.

Cook asserted that her confidence in continued disinflation has been further reinforced by the moderation in wage growth.

“The employment cost index report showed that hourly compensation for private-sector workers rose at a 2.9% annual rate in the third quarter, the lowest since 2021,” she said.

Meanwhile, benchmark indices in the US traded in the red on Wednesday. The SPDR S&P 500 ETF Trust (SPY) was down by over 0.6% while the Invesco QQQ Trust, Series 1 (QQQ) was trading 0.89% lower on Wednesday afternoon.

However, retail sentiment for both the ETFs were trending in the ‘bullish’ territory.