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(Bloomberg) — Federal Reserve Governor Lisa Cook said inflation is headed in the wrong direction and she would be prepared to raise interest rates if that persists.
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While Cook said she favors holding borrowing rates steady for now and that she expects price growth to cool again in coming months, her remarks bring her in line with a number of Fed officials who’ve signaled that accelerating inflation is now a bigger policy concern than the labor market.
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“I want to be clear about my risk assessment: The risks remain tilted toward higher inflation,” Cook said Wednesday in remarks prepared for an event at Stanford University.
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Cook said five years of inflation above the Fed’s 2% target poses the risk that price pressures will become embedded into price- and wage-setting behavior. “As such, I am prepared to raise rates, if the expected disinflation does not appear in a timely manner,” she said.
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The US war in Iran continues to roil energy markets, putting upward pressure on inflation. A measure of consumer prices rose in April by the most since 2023, as gasoline, rent and food prices climbed.
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At their meeting last month, a majority of Fed officials warned the central bank would likely need to consider raising interest rates if inflation continued to run persistently above their goal, according to minutes of the gathering. Officials at that meeting left the Fed’s benchmark interest rate unchanged in a range of 3.5% to 3.75%.
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In her speech, Cook said a $1.5 trillion investment boom into artificial intelligence could be the source of another price shock, noting the impact on prices for chips and other high-tech equipment.
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Cook described the labor market as largely stable, but said downside risks to employment are “elevated.”
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In her speech, Cook said the Fed is using AI to improve its analysis of the financial sector and to highlight vulnerabilities, which she said will help policymakers identify and respond to threats.
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(Updates with additional Cook comment in last paragraph. An earlier version of this story corrected day of the week.)
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