Federal Reserve Governor Lisa Cook warned that inflation risks are increasingly tilted to the upside, even though she currently favors keeping interest rates unchanged. Speaking at a policy forum at Stanford University, Cook said the Fed should continue holding rates steady “from a risk-management perspective,” but stressed that policymakers must remain prepared to tighten further if inflation fails to ease in a timely manner.
Cook acknowledged that inflation is “clearly moving in the wrong direction,” citing tariffs, the Iran conflict, rising oil prices, and surging AI-related investment as major drivers of renewed price pressures. She pointed specifically to rising energy and fertilizer costs, as well as stronger demand for chips, software, and construction workers linked to the rapid expansion of AI data centers.
Importantly, Cook warned that after more than five years of inflation running above the Fed’s 2% target, the danger of inflation expectations becoming embedded is increasing. “The risks remain tilted toward higher inflation,” she said, adding: “I am prepared to raise rates, if the expected disinflation does not appear in a timely manner.” While she still expects inflation to moderate without additional tightening, her remarks reinforce a broader shift among Fed officials toward greater caution about persistent second-round inflation pressures.
