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The Fed: Fed’s Cook says inflation remains ‘far too high’ despite some encouraging signs

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Federal Reserve Governor Lisa Cook on Friday stuck to the central bank’s cautious pessimism about inflation, in contrast to some market participants who believe the worst has passed.

“Inflation remains far too high, despite some encouraging signs lately, and is therefore of great concern,” Cook said, in a speech at the meeting of the American Economics Association, in New Orleans.

Former Fed Vice-Chairman Alan Blinder noted, in an op-ed in the Wall Street Journal Friday, that the annualized inflation rate for the price index for personal consumption expenditures, or PCE, which the Fed prefers, has been around 2.5% over the past five months.

However, in her remarks, Cook was not ready to declare even partial victory.

“Monthly data are quite volatile, so I would caution against putting too much weight on the past few favorable monthly data reports,” she said.

In her prepared remarks, Cook did not discuss the prospective path of interest rates. Other Fed officials speaking in New Orleans, and elsewhere, this week, have stressed that the Fed’s benchmark rate needs to go higher in order to make sure inflation falls to the central bank’s 2% target.

See also: Fed’s Bullard says 2023 on track to be a ‘disinflationary year’

Earlier Friday, the Labor Department reported the economy added a net 223,000 jobs in December. Investors were pleased by the moderation in wage growth.  Year-over-year wage growth slowed from 4.8% to 4.6%, the smallest annual gain since August 2021. 

U.S. stocks
DJIA,
+1.69%

 
SPX,
+1.66%

were higher in the wake of the job data, while the yield on the 10-year Treasury note
TMUBMUSD10Y,
3.583%

fell.

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