Fed’s Cook Says US Data Are Consistent With a Soft Landing

Lisa Cook, governor of the US Federal Reserve, speaks during a Fed Listens event in Washington, DC, US, on Friday, March 22, 2024. A trio of central bank decisions this week sent a clear message to markets that officials are preparing to loosen monetary policy, reigniting investor appetite for risk. Photographer: Al Drago/Bloomberg (Al Drago/Bloomberg)

(Bloomberg) -- Federal Reserve Governor Lisa Cook said although soft landings in economies after bouts of high inflation are rare, that’s what she is predicting for the US as inflation cools with little damage to the labor market.

“My baseline forecast (and that of many outside observers) is that inflation will continue to move toward target over time, without much further rise in unemployment,” Cook said Thursday in prepared remarks to the Australian Conference of Economists in Adelaide.

Cook said the Fed is “very attentive” to the unemployment rate currently, and would be “responsive” if it worsened. “There can be non-linearities in these data,” she said.

Cook’s speech was on the global coincidence of inflation in post-pandemic economies and central bank responses. She said there were many reasons to explain why inflation rose in so many countries, such as snarled supply chains and disruptions in global supplies of food and energy.

Her comments followed two days of testimony by Fed Chair Jerome Powell on Capitol Hill, where he said policymakers are waiting for more data to confirm that they are on a sustained path toward 2% inflation. Traders are pricing in a slightly more than 70% chance of a quarter-point cut in September.

The Fed chief also stressed that high inflation is not the only risk the central bank faces, and he said the policy committee is paying more attention to the labor market now, given recent cooling in the data.

The US central bank has held its benchmark lending rate at a more than two-decade high of 5.25% to 5.5% for nearly a year in a bid to curb inflation.

(Updates third paragraph with Cook comments from question and answer period)

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