Fed’s Cook says he “wholeheartedly” supported Reuters’ half-point rate cut

(Reuters) – Federal Reserve Governor Lisa Cook on Thursday approved a 50 basis point cut in the U.S. central bank’s interest rate last week as a way to address increased “downside risks” to employment.

“I wholeheartedly supported the decision,” Cook said in remarks prepared for delivery at Ohio State University. “This decision reflected growing confidence that, with an appropriate recalibration of our policy stance, the strong labor market can be maintained against a backdrop of moderate economic growth and inflation that continues to move sustainably to target our”.

Cook voted 11-1 at the Fed to cut the policy rate by half a percentage point on September 18. Her prepared remarks, mainly about the impact of artificial intelligence on productivity and jobs, did not address her views on how much or how fast the Fed should cut rates from here.

“As I consider the path forward for policy, I will carefully consider the incoming data, the evolving outlook and the balance of risks,” she said, using the same language the Fed used in its statement announcing the rate cut.

The U.S. labor market remains “solid,” she said, but has cooled considerably this year, with the unemployment rate rising to 4.2 percent from a low of 3.4 percent.

“Because the supply and demand for labor is now more balanced, it may become more difficult for some people to find work,” she said, noting that less educated and minority workers tend to suffer more from the weakening economic conditions.

Meanwhile, she said, inflationary pressures eased to 2.5% in the 12 months to July. That’s “significantly closer” to the Fed’s 2 percent target than it was a year ago, she said.

“The return to labor market balance between supply and demand, as well as the continued return to our inflation target, reflects the normalization of the economy after the dislocations of the pandemic,” she said. “This normalisation, particularly of inflation, is welcome as a balance between supply and demand is essential to maintaining a prolonged period of labor market strength.”