The expected interest rate cuts by the Federal Reserve have added uncertainties.
On July 15 local time, Federal Reserve Board Director Lisa Cook stated that if there are no obvious signs of a slowdown in inflation in the United States, she is “ready to take action,” suggesting that the Federal Reserve may continue with its tightening policies and even consider raising interest rates.
According to Reuters, Cook said during her speech in Washington that it is possible to ‘wait for a while longer’ to observe the trend of inflation. However, she believes that the risk in the future still favors an increase in inflation.
"If we don't see signs of inflation decline soon, I am prepared to take action." Cook stated, "I am fully committed to achieving the 2% inflation target, and this commitment will not change."
Cook said that the risk profile facing the U.S. economy has changed compared to a year ago. Previously, the market was more worried about a weak job market, but now the job market remains stable, and inflation pressures have once again become a major risk.
"Compared to about a year ago, the risk balance has undergone a significant shift; currently, inflation risk has exceeded labor risk." she said.
Cook also warned that the investment boom in artificial intelligence, U.S. tariff policies, and the price pressures caused by Middle Eastern conflicts could all contribute to persistent high inflation.
Currently, inflation levels in the United States are still higher than the Federal Reserve’s target of 2%. Cook said that the current policy rate of 3.50% to 3.75% by the Federal Reserve remains at a “moderately restrictive” level, which can help curb inflation. However, the Fed still needs to monitor more data to determine whether the current rate is effective enough.
Reuters reports that the Federal Reserve is currently discussing the possibility of future policy adjustments. The market previously expected interest rate hikes to occur as soon as this fall.
Federal Reserve Board member Christopher Waller also said this week that if there is no sustained sign of inflation decline in the coming months, the Federal Reserve may need to take action.
However, two recent inflation figures released by the United States are relatively mild, making the prospects for interest rates more complex. The next monetary policy meeting of the Federal Reserve will be held on July 28-29th, and markets are expected to focus on whether officials will emit further hawkish signals.
