FED: Gov Cook: Appropriate To Hold Amid Uncertainty

Fed Governor Cook (permanent voter) echoes some of her senior FOMC colleagues in a speech Thursday (link), suggesting rates should remain on hold while uncertainty over policy and the outlook prevails: "I believe it will be appropriate to maintain the policy rate at its current level while continuing to vigilantly monitor developments that could change the outlook". 

• However, she sounds among the more dovish members of the FOMC at this juncture, still highlighting that her base case is for rate cuts: "over time, if uncertainty clears and we see further progress on inflation toward our 2 percent target, it will likely be appropriate to lower the policy rate to reduce the degree of monetary policy restriction. I could imagine scenarios where rates could be held at current levels longer or eased faster based on the evolution of inflation and unemployment. For now, we can afford to be patient but attentive. I believe that policy is well situated to respond to developments, and I am continuously updating my outlook as matters evolve."
• The last time we heard from Cook, on January 6, she also expressed a patient stance, saying the Fed can "proceed more cautiously with further cuts though "over time, I still think it will likely be appropriate to move the policy rate toward a more neutral stance" - so not a major shift.
• Her overall baseline forecast "is that U.S. economic growth will slow moderately this year, with the unemployment rate picking up a bit, while inflation progress will stall in the near term, in part because of tariffs and other policy changes. Elevated and rising uncertainty, however, means that I am very attentive to scenarios that could be quite different from my baseline. It is possible that new policies could prove to be minimally disruptive and consumer demand could remain resilient, and overall growth may be stronger than anticipated. However, I currently place more weight on scenarios where risks are skewed to the upside for inflation and to the downside for growth. Such scenarios, with higher initial inflation and slower growth, could pose challenges for monetary policy."
• She calls current monetary policy "moderately restrictive, though less so than before our rate cuts last year".
• On inflation and tariffs: "the decline in inflation over the past year has been slow and uneven... Tariff increases typically result in an increase in the level of prices for the affected goods, which temporarily pushes up the overall inflation rate. But what matters for monetary policy would be a persistent boost to inflation. I am carefully watching various channels through which tariff effects could have more widespread implications for prices."
• This echoes recent commentary by other Fed officials, as does her noting the spike in inflation expectations in the Michigan survey, while also emphasizing that market-based longer-term expectations remain tamed.
• On the labor market: "Looking beyond the headline labor market data, recent signals of softness have emerged and should be monitored. "