By Michael S. Derby
NEW YORK (Reuters) – Federal Reserve Governor Lisa Cook said on Friday that the outlook for the next phase of the central bank’s monetary policy has dimmed after the agency So Minglang took appropriate aggressive steps last year to reduce price pressure.
As the Fed makes its next decision on the direction of interest rate policy, “I am weighing the economic strength evident in the economic indicators over the past few months against the impact of potential headwinds from recent banking developments ,” Cook said in a speech delivered at Georgetown University’s McDonough School of Business.
“If tighter financing conditions were a significant headwind to the economy, the appropriate path for the federal funds rate would likely be lower than it would have been without financing conditions,” Cook said, adding that “if the data Indicative of continued strength in the economy and moderation in deflation, we may have more work to do.”
Cook’s speech comes as central bankers are set to speak at the May 2-3 Fed meeting. The meeting goes into a quiet period before the Open Market Committee meeting. Officials said they expected to raise rates by 25 percentage points to a range of 5.25%, in line with market expectations. Inflation is showing signs of easing as the fallout from banking problems last month remains uncertain, with markets expecting this to be the last hike in the campaign that began in March 25.
Forecasts from Fed officials at their March meeting suggest that the looming rate hike will be the last and that they will remain on hold for the rest of the year. But they also don’t know the extent to which credit conditions are likely to tighten and dampen growth because of the turmoil in the banking sector.
Cook said in his speech that inflation has been falling, but underlying price pressures remain strong and integrated into the economy. She pointed to signs of cooling in housing sector inflation as one reason to hope price pressures would ease further, noting that inflation, as measured by the personal consumption expenditures price index, likely fell to 4% in March from 5% the year before. moon.
Cook also said the labor market remains strong, but there are signs that it too is starting to slow.
“Wage growth has moderated compared to levels reached about a year ago” and “hiring indicators have slowed,” Cook said. She also said job vacancies, while still high, had also decreased.
