Federal Reserve Governor Lisa Cook warned Wednesday that she is prepared to hike interest rates if inflation doesn’t start to cool off – as an increasing number of officials signal a readiness to tighten policy.
“I am prepared to act by raising rates, if necessary,” Cook — whom President Trump tried to fire over alleged mortgage fraud — said at the Economic Luncheon of the Anchorage Economic Development Corporation in Anchorage, Alaska.
“I would support an increase, if it becomes necessary, to bring inflation down. It may not.”
She argued that the risks to the price stability side of the Fed’s mandate are higher than risks to its goal of full employment, as the US faces “too high” levels of inflation.
Cook also said that the Fed is running out of time to deal with stubborn inflation, which has been running above its 2% goal for more than five years – easing slightly to 3.5% in June.
“Inflation may become entrenched in price- and wage-setting behavior, leading to persistence that would be much harder for us to attack,” Cook said.
“While we might be able to afford to wait for longer in a different environment, we do not have that luxury in this one.”
At the Fed’s meeting last week, Cook was among the nine officials who voted to hold interest rates in the key 3.5% to 3.75% range – though three officials preferred to hike rates, a sign of deepening dissent within the board over how aggressively they should tackle inflation.
Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack and Minneapolis’ Neel Kashkari tried to raise rates by a quarter point. Others – like New York Fed President John Williams and Philadelphia’s Anna Paulson – have also signaled an openness to raising rates.
“I felt it was appropriate not to change rates while we see how” inflation pans out, Cook said Wednesday – nodding to uncertain elements like tariffs, the Middle East conflict and massive AI spending.
However, she said: “I am firmly committed to restoring price stability.”
Fed Chair Kevin Warsh, who has been on the job for less than three months, repeatedly emphasized the committee’s promise to lower prices at the Fed’s meeting last week – but he also refused to answer when he would be ready to raise rates.
Inflation eased slightly in June on falling energy prices, but oil prices have since spiked and dipped several times amid back-and-forth reports over negotiations with Iran.
The debate for officials has become whether one good inflation report is enough to shake off concerns around prices – and whether they would be raising interest rates too soon as a result, potentially stunting economic growth.
The opposite concern is that officials could wait too long to raise rates, allowing inflation to run rampant.
Last August, Trump attempted to fire Cook, a Biden appointee, over allegations of mortgage fraud.
The Supreme Court in June blocked Trump’s bid to fire Cook, arguing such a dismissal from the White House could set a precedent that would politicize policy decisions.
Cook has denied wrongdoing.
Powell – who Trump called “stupid” and “hardheaded” for not slashing interest rates faster – and one of his predecessors, Ben Bernanke, attended oral arguments in the case earlier this year to show solidarity with Cook.