Fed’s Cook says December meeting "live" for potential rate cut

Investing.com -- Federal Reserve Governor Lisa Cook indicated Monday that the December Fed meeting is "live" for a potential interest rate cut, though her decision will depend on incoming data from various sources amid the ongoing federal shutdown.

Speaking at the Brookings Institution, Cook emphasized that risks to both sides of the Fed’s dual mandate are currently elevated. "Keeping rates too high increases the likelihood that the labor market will deteriorate sharply. Lowering rates too much would increase the likelihood that inflation expectations will become unanchored," she said.

Cook acknowledged the challenges of providing an economic outlook without fresh government data on jobs, inflation, and economic growth since the federal shutdown began on October 1. However, she assured that policymakers are "not flying blind," as they analyze available administrative sources, private-sector data, and Fed surveys.

The current data confirms her view that inflation remains "somewhat elevated due to tariff effects and subject to upside risks," while the job market is "still solid" but cooling and potentially facing a faster-than-expected decline.

Cook voted for last week’s quarter-point rate cut because it maintained a "modestly restrictive" policy stance to combat inflation while addressing what she sees as greater risks to the labor market than to inflation acceleration.

She noted that every Fed meeting is "live" for monetary policy decisions, which are not following a preset path. Cook also supported the Fed’s move to stop shrinking its balance sheet.

While acknowledging that the government shutdown is weighing on the economy, Cook expressed confidence that growth would return, aided by productivity gains from artificial intelligence. She remains "fully committed" to bringing inflation back to the 2% target once tariff impacts pass through the economy.

Cook’s term at the Fed extends to 2038, though her position is currently being challenged in a case pending before the U.S. Supreme Court, with a hearing expected in January.

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