Fed's Cook Says Supply Shock Effects Unexpectedly Durable, Testing Traditional Response

Deep News
19 mins ago

Federal Reserve Governor Lisa Cook said supply shocks have become more prominent and their effects are "unexpectedly persistent," testing the Fed's traditional approach of choosing to look through such shocks.

Speaking Thursday at an event hosted by the New York Fed, Cook said: "The effects of supply shocks have been unexpectedly persistent, and we've seen more and more supply shocks over the past few years, so they've become more prominent."

She said: "Our traditional view in the past was to look through these supply shocks, because tightening monetary policy won't affect oil prices, and it won't affect wars."

Speaking during a panel discussion alongside New York Fed President John Williams, Cook said: "What may be the case now is that, depending on many different factors, different conclusions may be reached about what the optimal policy response is."

She said the Fed needs to ensure that inflation expectations do not become unanchored.

Cook reiterated that she believes the artificial intelligence buildout is adding to inflationary pressure, and that it remains unclear when this technology will deliver productivity gains.

She said: "I worry about when we will see the productivity gains that can help cool inflation, and where the next supply bottleneck will be."

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