US Fed official says 'prepared to act' to curb inflation

WASHINGTON: A key US central bank official expressed her readiness Wednesday to take action against inflation if price increases remain stubborn.

“If we do not see signs of disinflation soon, I am prepared to act,” Federal Reserve governor Lisa Cook said in prepared remarks to an event in Washington.

“I am fully committed to reaching our inflation target, and this commitment is unwavering,” she added.

The Fed has a dual mandate of maintaining price stability and maximum employment, and generally keeps interest rates higher to curb inflation or lowers rates to boost the jobs market.

Cook has flagged greater concern surrounding inflation rather than the jobs market currently, implying that she could support a rate hike down the line.

But she stressed in her prepared remarks Wednesday that “at this juncture, I see it as prudent to give a bit more time to observe how inflation unfolds from here.”

“Going forward, though, I believe the risks continue to be strongly weighted toward higher inflation,” she warned.

This is because the artificial intelligence buildout “does not show signs of slowing,” while tariffs and conflict in the Middle East “risk leading to persistently higher inflation.”

Cook estimates that headline inflation this year will be about one percentage point higher than what was anticipated a year ago.

US inflation has also been above the Fed’s two percent target for around five years now, fueling concerns.

Official data released this week showed consumer inflation at 3.5 percent in June, cooling from May’s reading on lower energy prices amid hopes of a US-Iran deal.

But hostilities have since resumed in the Middle East, sending oil prices higher. This could keep inflation persistent.

The Fed’s rate-setting committee is due to meet next between July 28 and 29.