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While the US economy remains resilient, risks have increasingly shifted toward inflation rather than employment, prompting Federal Reserve Governor Lisa D. Cook to reaffirm her commitment to bringing inflation back to the central bank's 2 per cent target, according to a statement by the Federal Reserve.
Delivering her speech on the economic outlook, Cook noted that persistently high inflation continues to place a heavy burden on American households; hence, restoring price stability remains the Federal Reserve's primary responsibility. "Even though this week's consumer price index and producer price index reports were softer than expected, they still imply that the price index we target rose 3.7 percent in the 12 months through June. That is 1.7 percentage points above our 2 percent target. We have not reached our 2 percent target in more than five years," she added. Cook noted that the U.S. unemployment rate stood at 4.2 per cent in June, broadly unchanged from the past year and in line with what many economists consider the economy's natural rate of unemployment. The Fed Governor also acknowledged that the low-hire, low-fire labour market has made it harder for some groups, particularly first-time job seekers, to find employment. However, she said available evidence suggests that the subdued hiring environment, driven by structural factors and slower population growth, does not signal an impending downturn in the labour market. "I see few reasons that today's labor market has more risk than a year earlier. Therefore, risks on the employment side have diminished. The balance of risks has teetered toward the inflation mandate," she added. Cook said US GDP grew 2 per cent in 2025 and is projected to expand 2.2 per cent in 2026, both exceeding last year's forecasts, while labour productivity has averaged a robust 2.5 per cent annual growth over the past two years. "The data center buildout has added some heat to the economy. As with the labor-market data, these developments point in the direction of less risk to the employment mandate," she added. Cook said headline inflation in 2026 is expected to be about 1 percentage point higher than projected a year ago, while core inflation has also exceeded earlier expectations, driven by core goods prices that have risen at an annual pace of around 5 per cent this year. Adding, the US economy has been hit by two unexpected price shocks this year--the Middle East conflict and higher capital spending on AI infrastructure--she said inflation risks now outweigh employment risks compared with a year ago. "I view the U.S. economy as remaining resilient," she said, adding "While I will decline to predict the path of policy today, I will underscore that I am committed to returning inflation to our 2 percent goal." (ANI)
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