In her address at an event hosted by Harvard University, Lisa Cook, representing the US Federal Reserve, underscored the necessity for the Central Bank to adopt a cautious stance regarding the initiation of interest rate cuts.
She highlighted the delicate balance between the risks associated with implementing monetary policy easing prematurely and the dangers of proceeding too slowly in that direction.
Cook remarked on the evolving dynamics where inflation is moderating while the labor market remains robust, thus leading to a more balanced outlook concerning employment and inflation objectives. She further suggested that attaining price stability might necessitate a prudent and gradual approach to monetary policy easing.
Cook refrained from specifying a precise timing for the commencement of rate cuts or the pace at which the Fed should proceed. At the recent monetary policy meeting, FOMC members projected three quarter-percentage-point rate reductions for the year, with market players anticipating the initial cut to occur in June.
She anticipated a continued decline in housing inflation, a significant contributor to inflationary pressures. Cook also acknowledged productivity enhancements that could enable the economy to sustain growth above trend without a resurgence of the high inflation experienced in the past.
Lisa Cook cautioned against premature or excessive easing of monetary policy, emphasizing the potential for such actions to drive inflation beyond the target range or impede economic advancement.
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