Internal divisions are emerging within the U.S. Federal Reserve regarding inflation and the future direction of interest rates. Lisa Cook, a member of the Fed, warned that "if inflation does not sufficiently slow down, we may need to take policy action," while John Williams, president of the Federal Reserve Bank of New York, stated that "inflation has already peaked."
On July 15, Cook made her remarks at an event in Washington, indicating that she is prepared to act if signs of disinflation do not appear soon. Although she did not specify a particular policy direction, her comments were interpreted as leaving open the possibility of further tightening.
Cook emphasized that the risks of inflation should be prioritized over employment concerns, noting that while the labor market remains stable, prices are still at elevated levels.
She identified factors contributing to rising prices, including increased investment in artificial intelligence (AI), supply shocks from tariffs, and tensions between the U.S. and Iran. Cook specifically warned that "recent price increases cannot be explained solely by energy prices," suggesting a risk of prolonged high inflation.
In contrast, Williams expressed optimism that inflation will gradually decrease. Speaking in New York, he acknowledged that "inflation is undoubtedly too high," but added that "it has peaked, and there are reasons to expect it to decline gradually over the next few quarters."
Williams explained that the impact of price increases due to tariffs has largely been accounted for, and the upward pressure from housing and energy costs is also easing. He noted that the labor market is not creating additional inflationary pressures.
He also projected that the supply-demand imbalance caused by AI investment will gradually resolve as supply increases. Williams expects the inflation rate to drop to about 3.25% by the end of this year and to reach the Fed's target of 2% by 2028.
While Williams assessed that current monetary policy is appropriate for reducing inflation, he did not provide specific signals regarding the future path of interest rates.
* This article has been translated by AI.
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