Federal Reserve Governor Lisa Cook said on Monday that it makes sense to cut interest rates more gradually given the resilience of the labor market and better-than-expected inflation.
“I think we can afford to proceed more cautiously with further cuts,” Cook said in a speech in Ann Arbor, Michigan.
The Fed’s interest rate cut since September “noticeably reduced the restrictiveness of monetary policy,” she added. The Fed has now cut short-term rates by a full percentage point, to a range of 4.25%-4.50%.
Cook became the latest Fed official in the new year to offer a cautious comment about the central bank’s path forward.
Fed Governor Adriana Kugler and San Francisco Fed President Mary Daly both said over the weekend that the Fed still has work to do to reduce inflation, but that they do not want to further weaken the labor market while they focus on that task.
“We’re fully aware that we’re not there yet — nobody’s popping the champagne anywhere,” Kugler said at the American Economic Association’s annual conference in San Francisco. “And at the same time … we want the unemployment rate to stay where it is” and not rise aggressively.
The unemployment rate in November is 4.2 percent, reports SEEbiz. Friday brings a new reading of the labor market, and economists expect the unemployment rate to remain stable at 4.2%.
Economists expect a gradual decline in the number of jobs, with 153,000 new jobs in December compared with 227,000 in November.
Central bank officials will also pay close attention to inflation as they prepare for their next meeting on 28-29. in January, following the inauguration of Donald Trump as president on January 20.
The latest reading of the Fed’s preferred measure of inflation – the personal consumption expenditures (PCE) price index – showed a contraction to 2.4 percent in November. That’s down significantly from a peak of 7.2 percent in June 2022, but still above the Fed’s 2% target.
