Fed Vice Chair: "Inflation Risks Still Tilted to the Upside"

Fed Vice Chair: "Inflation Risks Still Tilted to the Upside"

Governor Lisa Cook: Interest Rate Freeze Appropriate for Now

Federal Reserve (Fed) officials have successively mentioned upside risks to inflation.

Bloomberg reported that Fed Vice Chair Philip Jefferson said in a speech distributed in advance of a conference hosted by the Bank of Japan in Tokyo on the 28th that he expects inflation to slow in the latter half of this year as the effects of tariffs and rising energy prices wane.

However, Vice Chair Jefferson added that inflation risks are still tilted to the upside.

He stated that he is closely monitoring signs that rising energy costs due to the war in Iran are negatively impacting consumer spending. He also added that signs of a weakening labor market continue to emerge.

He said, "I believe the current policy stance is very well-positioned to respond to evolving economic conditions, based on incoming economic data, changing outlooks, and the balance of risks."

Chicago Federal Reserve Bank (Fed) President Austan Goolsbee said that rising expectations for the productivity enhancement potential of artificial intelligence (AI) could increase inflationary pressures.

President Goolsbee stated, "The greater the expectations for future productivity, the more we may need to raise interest rates to prevent overheating."

He warned, "If we face short-term supply shocks due to oil price fluctuations, supply chain disruptions, and other factors, the problem could worsen."

Goolsbee's remarks refute the view that AI could be a deflationary factor, creating room for central banks to cut interest rates.

Earlier, Fed Governor Lisa Cook stated on the 27th (local time) that inflation is moving in the wrong direction, and if this trend continues, she is prepared to raise interest rates.

Governor Cook made these remarks at a Stanford University event that day, saying, "What I want to make clear in my risk assessment is that the upside risks to inflation remain high."

She stated that freezing interest rates for the time being is appropriate and predicted that inflation would slow down again in the coming months.

However, she pointed out that if inflation remains above the Fed's target of 2% for five years, there is a risk that inflationary pressures could become entrenched in price and wage-setting decisions.

She further emphasized, "If the expected disinflation does not materialize in a timely manner, I am prepared to raise interest rates."

Governor Cook also assessed the current U.S. labor market as generally stable, while diagnosing that downside risks to employment have increased.

Along with this, she mentioned that the recent $1.5 trillion AI investment boom, centered on semiconductors and advanced equipment, could be another factor contributing to upward price pressure.