Federal Reserve Governor Lisa Cook said on Wednesday (US time) that she’s considering the possibility that the central bank may be left with no choice but to increase its short-term interest rate if inflation levels in the US economy remain “too high.”
“I am prepared to act by raising rates, if necessary,” Cook said while addressing the 2026 Economic Luncheon of the Anchorage Economic Development Corporation in Anchorage, Alaska, news agency Reuters reported. “I would support an increase, if it becomes necessary, to bring inflation down. It may not,” she added as per the report.
The Fed governor’s remarks come about a week after the Federal Reserve released its latest interest rate decision, wherein officials decided to keep rates at a range of 3.5% to 3.75%. Cook was part of a 9-3 majority to vote in favour of the central bank keeping the federal funds target rate unchanged after the latest Federal Open Market Committee (FOMC) meeting in late July.
What did Fed Governor Lisa Cook say about the rates?
During her speech this week, Cook admitted that consumers feel troubled by several factors, including inflation. And yet, she maintained, “I felt it was appropriate not to change rates” in the July FOMC meeting, as they wait to see how inflation trends manifest in the near future.
Further noting “the most dire predictions about AI job losses have not materialised,” she said that inflation drivers – like tariffs, the war in Iran and investments linked to artificial intelligences – may eventually ease and, in turn, bring down price pressures.
She also warned, “Inflation may become entrenched in price- and wage-setting behavior, leading to persistence that would be much harder for us to attack,” adding, “while we might be able to afford to wait for longer in a different environment, we do not have that luxury in this one,” according to Reuters.
“With five years of above-target inflation, the risk grows that higher inflation may become entrenched in price- and wage-setting behavior, leading to persistence that would be much harder for us to attack. The longer inflation is above target, the more likely this scenario becomes,” Cook added in her speech at the 2026 Economic Luncheon.
According to the US Labor Department data released July 14, 2026, the annual inflation rate in the United States was 3.5% for the 12 months ending June, down from 4.2% previously.
More about the unaltered Fed interest rates
When asked about “pausing” interest rates instead of hiking or slashing them in a post-conference discussion with reporters last week, Federal Reserve Chairman Kevin Warsh said he “wouldn’t characterise what we did as anything like a pause. I would characterise what we did as a rigorous review of the economic situation.”
He added, “I would characterise what we did as a review of the big hard questions, and I’d characterise it as a view of what our own homework is to try to resolve those questions in the period ahead.”
As rates remained unaltered, President Donald Trump thereafter appeared to assert that Warsh would like to lower them but is being held back by the Federal Open Market Committee. Having long demanded rates to be slashed, Trump said at the White House, “Kevin’s fantastic, but he’s got a board.”