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Federal Reserve governor Lisa Cook has signalled that a December interest rate cut is far from assured, in her first public remarks since Donald Trump attempted to fire her from the US central bank’s board.
“Policy is not on a pre-determined path,” Cook said at the Brookings Institution think-tank in Washington on Monday.
She added: “Keeping rates too high increases the likelihood that the labour market will deteriorate sharply. Lowering rates too much would increase the likelihood that inflation expectations will become unanchored.”
Cook, the first black woman to serve on the Fed’s board of governors, has not delivered a speech since mid-July — a little over a month before Trump announced plans to sack her over allegations of mortgage fraud, which she has denied.
A federal court in Washington later reinstated her, after Cook sued the US president in a case that is seen as vital to upholding the central bank’s independence. In October, the Supreme Court said Cook could continue to work at the Fed until it heard oral arguments of the case in January.
Cook’s remarks come after Fed chair Jay Powell said last week that a December rate cut was far from a “foregone conclusion” after the central bank lowered its benchmark federal funds target for the second time this year to a range of 3.75-4 per cent — its lowest level since late 2022.
As of Monday markets were still pencilling in roughly 65 per cent odds of a rate cut next month, according to CME Group data on federal funds futures — down from above 90 per cent before Powell’s remarks.
Several members of the rate-setting Federal Open Market Committee have said they opposed last week’s cut and indicated they did not support lowering borrowing costs in December, unless data pointed to a substantial weakening in the US labour market.
They say inflation remains well above the Fed’s 2 per cent target, with higher electricity prices and insurance premiums adding to the cost pressures resulting from Trump’s tariffs on US imports.
Cook said she expected inflation to remain elevated above the Fed’s goal for the next year, though she still anticipated tariffs would prove a one-off shock and not produce sustained price pressures.
While a drop in job creation in recent months was largely down to Trump’s immigration crackdown and not “a definitive signal about labour-market slack”, the Fed governor warned that lower-income households were vulnerable to a labour market shock.
“In the labour market, youth and Black unemployment rates, both of which tend to be more cyclical than total unemployment, have steadily risen since this spring through the latest readings in August,” Cook said. “The deteriorating labour market experienced by these two vulnerable groups mirrors other emerging strains in some households’ financial health and balance sheets.”
Cook pushed back against Powell’s remarks that the Fed would need to “slow down” its decision-making, due to the “fog” caused by the government shutdown leading to fewer official data releases.
“We are not flying blind,” Cook said. “The staff at the Federal Reserve and I use a wide variety of data from administrative sources and various private-sector providers to continually evaluate the state of the economy in real time.”
The president, who has railed against the Fed since his return to the White House, moved to fire Cook at the end of August after Federal Housing Finance Agency director Bill Pulte alleged Cook had claimed both a house in Michigan and an Atlanta condominium as her principal residence.
Trump has argued that the evidence presented by Pulte would allow him to remove Cook “for cause” — a principle that has rarely been tested in court but is typically interpreted as gross misconduct.
While the Department of Justice is investigating the case, the Fed governor is yet to be charged.
