Fed’s Cook strikes hawkish tone in rare appearance

• Key Insight: Fed Gov. Lisa Cook highlighted her commitment to getting inflation to 2% and said she will “act forcefully” if signs emerge that point to cost pressures increasing.
• Expert quote: “Looking ahead, policy is not on a predetermined path.” — Fed Gov. Lisa Cook.
• What’s at stake: Cook’s remarks come amid a growing rift among central bank officials over what monetary policy stance the Fed should take at its December meeting, with some members viewing the risks posed by rising inflation as greater than the risks of a further weakening labor market.

Federal Reserve Governor Lisa Cook struck a hawkish tone in a public appearance Monday, saying she would “act forcefully” if inflation resurges and reiterating the central bank’s mantra that policy “is not on a predetermined path.” 

Her comments, made at an event Monday afternoon at the Brookings Institution, come amid a burgeoning rift on the central bank’s Federal Open Market Committee over whether another quarter-point rate cut is in the offing at the FOMC’s next meeting in December.

In her first public appearance since President Donald Trump attempted to oust her from her role, Cook noted that the personal consumption expenditures price index rose 2.8% in the 12 months ending in September. She said the figure remains “significantly” above the Fed’s 2% target, and with tariff price increases still making their way to the real economy, she said the near-term inflationary picture has yet to come into clear focus.

Cook said tariffs should, in theory, represent a one-time increase. However, she added that her outreach to business leaders suggests the pass-through of tariffs to consumers is not yet complete.

“I am committed to reaching our 2% inflation target,” Cook said. “Moreover, I will be prepared to act forcefully, if the tariff effects appear to be larger or last longer than expected, or if other evidence emerges that higher levels of inflation are becoming entrenched in expectations.

“Looking ahead, policy is not on a predetermined path,” she added.

Cook’s remarks come amid a growing rift among central bank officials over what monetary policy stance the Federal Reserve should take at its next meeting, with some members viewing the risks posed by rising inflation as greater than the risks of a further weakening labor market.

Following the September meeting of the Federal Open Market Committee, in which policymakers voted to lower short-term interest rates by 25 basis points, Fed Chair Jerome Powell said the central bank’s policy is “not on a preset course” and that there are “strongly differing views” among members about whether another cut is coming in December.

“There were strongly differing views about how to proceed in December,” Powell said. “A further reduction in the policy rate at the December meeting is not a foregone conclusion — in fact, far from it.”

So far, three Fed officials have publicly said they did not support the decision to cut interest rates in September: Kansas City Fed President Jeffrey Schmid, a current voting member of the FOMC; and Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack, who are not voting members this year.

According to the CME FedWatch tool, 67.5% of investors expect the FOMC to cut rates by 25 basis points next month, while 32.5% anticipate rates will remain unchanged.

Regarding the labor market, Cook said during her Brookings speech that conditions remain “solid, though gradually cooling.”

She noted that available indicators show the unemployment rate edged up from 4.1% in June to 4.3%, a level she described as reflecting a “healthy economy.” Cook added the slowing in payroll gains observed over the summer was tied to a decline in population growth due to immigration policy, and that the figures “do not provide a definitive signal about labor market slack.”

The Fed official declined to comment on Trump’s attempt to remove her from the board over alleged mortgage fraud but said she supports the central bank’s independence.

“With respect to Fed independence, I’m not going to say much, but I support it,” Cook said.

President Trump shared a screenshot on social media of a letter to Cook informing her of her termination in late August, spurring Cook to file a lawsuit arguing that her termination — ostensibly related to alleged mortgage improprieties — was unlawful and exceeds the president’s power. A lower court issued an injunction allowing Cook to remain at her post pending the outcome of her lawsuit. The Supreme Court is scheduled to hear oral arguments in January on whether that injunction should be overturned.