On September 27, Caijing News reported that Federal Reserve Governor Lisa Cook supported the Fed's decision to cut interest rates by 50 basis points in September, citing a slowdown in inflation to address increasing risks to employment.

In a speech prepared for Ohio State University, she stated: "I wholeheartedly support this decision. This decision reflects our growing confidence that, as long as we adjust our policy stance appropriately, the stable labor market can be maintained against the backdrop of moderate economic growth and inflation continuing to decline to the target level."

However, Cook did not disclose her views on how much further the Fed should cut interest rates or at what speed. She emphasized careful observation of upcoming economic data and risk balances when considering the policy path.

Last week, the Federal Reserve initiated an easing cycle with a "heroic cut" of 50 basis points, bringing the federal funds rate to a range of 4.75% to 5%. Median estimates from Fed officials indicate that the Fed will cut rates by another 50 basis points at the remaining two meetings this year.

Cook stated, "When thinking about future policy paths, I will carefully study subsequent data, evolving outlooks, and risk balances." Her wording aligns with the Fed's policy statement released last week.

She also noted that the U.S. labor market remains "stable," but has cooled significantly this year, with the unemployment rate rising from a low of 3.4% to 4.2%. However, Cook mentioned that inflation pressures have eased, with the 12-month inflation rate as of July at 2.5%. She said this is "significantly closer" to the Fed's 2% target compared to a year ago.

"The return of labor market supply-demand balance and the continued return of inflation to target reflect the normalization of the economy after the pandemic shock. This normalization, especially of inflation, is welcome, as supply-demand balance is crucial for maintaining long-term strength in the labor market." She said.

However, Cook also acknowledges that 'economic normalization' may make it more difficult for some people to find work, such as recent college graduates, individuals with lower levels of education, and minority workers.

The speech also specifically mentioned artificial intelligence (AI) and its impact on inflation and workers in the United States. Cook stated that in the short term, AI may push up inflation due to high demand, but in the long run, AI may suppress inflation.

She also mentioned that this technology has the potential to provide 'significant and sustained' impetus for labor productivity growth. She said that although this may reduce job positions, it may also create new job positions.

'As a society, we need to consider how to retrain and support workers who may lose their jobs, even though many may benefit from the adoption of artificial intelligence,' she added.

Editor/Lambor