policy rates will change when disinflation looks sustainable

Federal Reserve (Fed) Governor and policymaker Lisa Cook spoke while participating in a moderated discussion at the Annual Conference of the Julis-Rabinowitz Center for Public Policy & Finance, hosted by Princeton University in New Jersey.

Key highlights

• Fed’s Cook believes risks to achieving employment and inflation goals have moved into better balance.
• would like to have greater confidence that inflation is converging to 2% before beginning rate cuts.
• Policy rate will eventually have to change as the disinflation outlook becomes more sustainable.
• The risk of persistently-high inflation has diminished, but not disappeared entirely.
• Disinflationary process has been, and may continue to be, bumpy and uneven.
• Consumer spending growth may face headwinds as household balance sheets deteriorate.
• Consumer spending has generally continued to show strong momentum in recent months.
• A strong supply-side recovery has contributed heavily to recent disinflation.
• Fed’s Cook sees potential for increased supply chain disruptions from Red Sea altercations.
• The post-pandemic world could be characterized by greater volatility of supply.
• Core goods inflation likely to converge to modestly negative pre-pandemic trend.
• 12-month PCE forecast seems reasonable, baseline outlook of convergence on 2% target.