Fed Governor Lisa Cook said risks are currently “tilted toward higher inflation,” explaining why she supported the FOMC’s decision to hold interest rates steady at last week’s meeting.
Cook noted in a speech that understanding why inflation leveled off in 2025 requires looking beneath the headline. Disinflation has continued in housing services, while non-housing services inflation has also eased, consistent with a labor market that is no longer as tight as before.
The area of concern, however, lies in “core good prices”. Cook highlighted a notable pickup in goods inflation, largely driven by last year’s tariff increases on a wide range of imported products.
While anchored inflation expectations suggest tariff effects should amount to a “one-time rise” in the price level, Cook stressed that uncertainty remains high. The “future direction of tariff policy is unclear”, and it is uncertain how quickly price increases will fully pass through or whether they risk influencing expectations.
Until clearer evidence emerges that inflation is moving sustainably back toward target, Cook said inflation is “where my focus will be”, barring unexpected changes in the labor market.
