According to the Zhito Finance APP, Federal Reserve Governor Cook recently stated that she is closely monitoring further signs of weakness in the usa labor market while observing whether inflation continues to fluctuate on the path to the central bank's 2% annual target. Cook expects that further interest rate cuts may occur in the future, but she emphasized that no decisions will be made in advance.

In her speech at the University of Virginia, Cook stated: "I still believe the direction of the policy interest rate path is downward, but the extent and timing of rate cuts will depend on the latest data, changing outlooks, and the balance of risks. I do not believe that policy is on a preset track; I am ready to respond to changes in the outlook at any time."

She added that if the pace of inflation easing stops, the Federal Reserve may pause rate cuts; and if there is greater weakness in the labor market, policies may need to be relaxed more quickly. In the case of a balance between the two, Cook expects interest rates to gradually decline to neutral levels, which do not stimulate or suppress economic activity.

Economic Outlook and Monetary Policy Adjustment.

As a voting member of the Federal Reserve's Federal Open Market Committee (FOMC), Cook has served as a member of the Federal Reserve Board since May 2022. On November 7, the FOMC lowered the target range for the federal funds rate by 0.25 percentage points to 4.5%-4.75%, following a 0.5 percentage point cut in September, marking a consecutive rate cut after more than a year without adjustments by the Federal Reserve.

Cook stated: "Overall, I believe economic conditions are good. The inflation rate has significantly decreased from its peak in mid-2022, although core inflation remains slightly high. The unemployment rate remains at historically low levels, but the labor market is no longer overheating. Economic growth this year has been strong, and I predict that this expansion will continue."

She mentioned that although risks of further weakness in the labor market still exist, her concerns about it have eased compared to a few months ago.

Latest Trends in the Labor Market.

The unemployment rate in the usa rose from a half-century low of 3.4% on April 2023 to 4.1% in October. Despite a slowdown in job growth, there has still been positive growth each month this year. Cook estimates that about 0.2 million new jobs need to be created each month to keep up with labor growth and maintain the unemployment rate. However, the average monthly job additions in the past six months have only been 0.132 million.

Cook stated, "Overall, national job growth remains robust, but it may not be sufficient to sustain the current low unemployment rate. Net job growth is slightly below the balanced level needed to accommodate changes in the labor force size."

She also noted that as the labor market cools down, wage growth slows, and it is no longer a source of inflationary pressure.

Future Path of Inflation.

Cook expects that the inflation rate will continue to present "fluctuations" on the path to the 2% target. The Fed's preferred inflation indicator, the Personal Consumption Expenditures (PCE) price index, which peaked at an annual increase of 7.2% in mid-2022, is expected to drop to an annual growth rate of 2.3% in October. The Core PCE price index (excluding food and energy components) remains stubbornly higher than the overall index, but its annual increase is expected to fall to 2.8% in October, down by half from the 2022 peak.

She predicts that in 2024, the overall and core PCE inflation rates will decrease to 2.2%, with housing inflation being the main factor causing the target to be exceeded. Cook pointed out that lease agreements are typically renewed annually, and the frequency of home sales is lower, so the decline in housing services inflation will be a slow process.

"Housing services account for a major part of core inflation exceeding our target," Cook said. "Existing rents are aligning with market rent levels, keeping housing services inflation temporarily high. I believe that as the effects of slowing rent growth for new tenants gradually manifest, housing services inflation will gradually decline over the next two years."

The Federal Reserve FOMC will hold its next meeting on December 17-18. According to cme FedWatch data, the interest rates futures indicate that the probability of the Federal Reserve lowering rates by 0.25 percentage points again is about 55%, while the probability of no rate change is 45%.