Federal Reserve Governor Lisa Cook addressed rising economic uncertainty and inflation risks linked to ongoing tariff policies during a Council on Foreign Relations event in New York. “The US economy is still on a firm footing, but uncertainty has notably increased since the beginning of the year,” Cook said.
Cook emphasized that while the final extent of President Trump’s tariffs remains unclear as policies evolve, their effects are already being felt. She particularly warned of rising inflation and a potential cooling in the labor market.
Price increases driven by these policy shifts, Cook noted, “may make it difficult to achieve further progress in the near term” toward reducing inflation. The Fed traditionally maintains higher interest rates when inflation is elevated and may lower rates to stimulate growth when inflation is subdued.
Currently, the Fed’s preferred inflation measure—the personal consumption expenditures price index (PCE)—rose 2.1% year-over-year in April. Although this marks a slight decline from the previous month, it remains just above the central bank’s long-term 2% target.
In a separate speech in Iowa, Chicago Fed President Austan Goolsbee described recent encouraging inflation data as “old news,” highlighting that these reports predate the full impact of tariffs. “Are the tariffs going to have a small impact? We gotta wait and see what happens,” Goolsbee commented.
Cook also cautioned that the economic environment could become “highly challenging for monetary policymakers.” Beyond policy changes, the reactions of financial markets, businesses, and consumers pose risks to both price stability and employment.
She explained, “The recent post-pandemic experience with high inflation could make firms more willing to raise prices and consumers more likely to expect high inflation to persist.”
As the US economy navigates these uncertainties, the Federal Reserve faces a complex task balancing inflation control and economic growth amid evolving trade policies.
